Development of Policy, Legal, and Insitutional Framework for - ppiaf

Development of Policy, Legal, and Institutional 

Framework for the Public-Private Partnership 

Program in Malawi 

Final Report 

FINAL REPORT 

31 March 2007 

Submitted To: 

Mr. Constantine Chikosi 

Senior Project Manager 

The World Bank, Malawi 

Submitted By: 

The Institute for Public-Private Partnerships, Inc. 

1010 Wisconsin Avenue, Suite 250 

Washington, DC 20007 USA 

Tel: 1-202-466-8930 

Fax: 1-202-466-8934 

www.ip3.org

Development of Policy, Legal, and Institutional 

Framework for the Public-Private Partnership 

Program in Malawi 

Final Report 

31 March 2007 

Submitted to: 




Submitted by: 

The Institute for Public-Private Partnerships, Inc. (IP3) 

1010 Wisconsin Avenue, NW, Suite 250 

Washington, DC 20007 USA 

Tel: 1-202-466-8930 

Fax: 1-202-466-8934 

www.ip3.org

31 March 2007 




RE: 

Final Report: Development of Policy, Legal, and Institutional Framework for the Public- 

Private Partnership Program in Malawi 

Dear Mr. Chikosi 

The Institute for Public-Private Partnerships, Inc. is pleased to submit the Final Report for the 

above referenced consultancy. We welcome your comments and feedback on the report. It has 

been a true pleasure working with you on this assignment. 

Sincerely, 

Matthew Hensley 

President 

IP3 

The Institute for Public-Private Partnerships (IP3), Inc. 

1010 Wisconsin Avenue, NW • Suite 250 

Washington, DC 20007 • T 202.466.8930 • F 202.466.8934 

www.ip3.org

Development of Policy, Legal, & Institutional Framework for the PPP Program in Malawi 

Final Report 

Contents 

I. EXECUTIVE SUMMARY ................................................................................................................. 1 

I.A. PPP Unit Human and Financial Resources ........................................................................ 6 

II. INTRODUCTION ............................................................................................................................ 13 

III. POLICY FRAMEWORK – DRAFT NATIONAL PPP POLICY ...................................................... 19 

III.A. Definition of Public-Private Partnership ............................................................................ 19 

III.B. Principles of Public-Private Partnerships .......................................................................... 20 

III.C. Role of the National PPP Unit and PPP Nodes in PPP Projects ...................................... 21 

III.D. Role of the Project Development Facility (PDF) ............................................................... 22 

IV. LEGAL FRAMEWORK .................................................................................................................. 23 

IV.A. Legal Framework Options Analysis .................................................................................. 24 

V. INSTITUTIONAL FRAMEWORK .................................................................................................. 38 

V.A. Phases of PPP Institutional Setup .................................................................................... 38 

V.B. Segregation of Duties and Prevention of Conflicts of Interest .......................................... 41 

V.C. Organizational Structure of the PPP Unit .......................................................................... 44 

V.D. PPP Unit Structure and Activities ...................................................................................... 44 

V.E. Phases of PPP Program Evolution ................................................................................... 45 

V.F. Terms of Reference for PPP Unit Staff Positions ............................................................. 47 

V.G. Project Development Facility (PDF) .................................................................................. 48 

V.H. Organizational Structure and Profile of PPP Unit Staff Positions ..................................... 53 

V.I. Relationship of PPP Unit to Other Government Departments and Agencies ................... 58 

V.J. Human Resource Implementation Plan ............................................................................ 63 

VI. ROAD MAP FOR PPP PROGRAM IMPLEMENTATION ............................................................. 69 

VI.A. Conduct Phase I PPP Activity in Privatisation Commission ............................................. 69 

VI.B. Prepare PPP Standards & Procedures Manuals for PPP Unit and PPP Nodes .............. 70 

VI.C. Prepare Standard PPP Procurement Documents & Model Contracts .............................. 71 

VI.D. Key Ministries Sponsor Cabinet Paper on PPP ................................................................ 71 

VI.E. Enact and Publish an Official National PPP Policy ........................................................... 72 

VI.F. Conduct Stakeholder Consultation on PPP Policy ........................................................... 72 

VI.G. Finalize and Enact PPP Regulations ................................................................................ 72 

VI.H. Select and Create Legal Structure for PPP Unit ............................................................... 73 

VI.I. Finalize Institutional and Reporting Relationships ............................................................ 75 

VI.J. Transfer Selected PC Staff to PPP Unit and Recruit for Gaps ......................................... 77 

VI.K. Commence PPP Unit Operations and Build Capacity in PPP Nodes ............................... 77 

VI.L. Phase II Unit Builds Deal Flow for Transition to Phase III Unit ......................................... 80 

VI.M. When Deal Pipeline is Sufficient Establish Phase III Unit ................................................. 81 

VI.N. Timeline for Implementation of the National PPP Program .............................................. 81 

ANNEX A. LEGAL FRAMEWORK ..................................................................................................... 84 

ANNEX B. DRAFT REGULATIONS ................................................................................................. 132 

ANNEX C. SCHEDULES TO REGULATIONS ................................................................................. 148 

ANNEX D. DETAILED JOB DESCRIPTIONS .................................................................................. 228 

THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS


Final Report 

I. EXECUTIVE SUMMARY 

Over the past several months, the IP3 team has conducted extensive field research, interviews, 

and reviews of existing reports in order to formulate a comprehensive plan for Government to 

create a policy, legal, and institutional framework for PPP. At the end of this research and 

analysis period, the team prepared a draft Cabinet Paper, for the Minister of Finance to present 

to Cabinet, proposing specific actions that could be undertaken by Government in order to 

establish such PPP frameworks. This Final Report serves as both an update of our previous 

reports and recommendations and an Action Plan for implementing the nascent PPP Program 

in Malawi. 

Malawi, along with numerous other countries, has been conducting Privatization in an effort to 

shift the burden of service delivery onto the private sector. This has been done by transferring 

the ownership and control of public enterprises to the private sector, with the objective of 

having services performed by those public enterprises subsequently performed by private 

enterprises, thereby relieving Government of the costs associated with owning and operating 

public enterprises. 

Legal Framework and Options for PPP: New Legislation Desirable in the Long Run but not 

Necessary in the Short-Run 

The Public Enterprise (Privitisation) Act provides the legal mandate for such privatization 

activities. However, the scope of the Act is limited to such transfers of ownership and control 

(privatization) to the private sector, including concessions. The question has arisen: “how can 

the private sector participate in the delivery of services to consumers, when such services are 

not to be delivered through the use of existing public assets?” Another way to phrase the 

question is: “what will be the legal basis of a transaction in which the private sector is invited to 

participate in the delivery of services (that would otherwise have been provided by the public 

sector) if there are no existing public assets to sell in order to enable the service delivery?” 

If the service delivery contemplated involves the use of new assets, there is no provision for 

such a transaction in the Public Enterprise Act, in its present form. However, there is a 

provision for issuing “concessions” to the private sector, and that provision provides a legal 

foundation to bridge the existing legislation with what we propose to be its new successor, a 

PPP Act. Such an Act would address the long term issues that will likely emerge as Malawi’s 

PPP program matures, harmonize existing legislation with key PPP practices and procedures, 

and modernize and clarify the process by which PPP projects are selected, tendered, negotiated, 

awarded, and monitored. 

However, PPP activities and transactions need not be delayed until a PPP Act is established. In 

fact, PPP can advance using existing legal instruments as long as “Implementing Rules and 

Regulation” as well as PPP “guidelines and procedures” are enacted so that line agencies, the 

private sector, and the public understand the rules of the game governing an effective PPP 

process. 

THE INSTITUTE FOR PUBLIC-PRIVATE PARTNERSHIPS 1


Final Report 

Our findings also conclude that it is unnecessary to amend the Public Enterprise (Privatisation) 

Act, to include both Privatization and Public-Private Partnership (PPP) concession activities. 

Amending current legislation would not only take just as much time as introducing new 

legislation, but would be an imperfect and incongruous “adjustment” that is neither legally 

effective nor politically well-timed. In the longer-term it is desirable to ‘umbrella’ legislation to 

address all of the GOM’s PPP activities across all of its functions, including ministries, 

procurement and oversight. This approach allows for a transition period, that would enable the 

Privatisation Commission (PC) to spearhead PPP policy, procedures and ‘deal flow’ for PPPs in 

addition to carrying out its privatization mandate. This responsibility to spearhead PPP on an 

interim basis would serve as the groundwork for the establishment and operation of a PPP Unit 

described in detail in the report. 1 . 

While the development of a new PPP act is recommended in the future, especially after PPP in 

Malawi grows to meet demand, PPP can and should proceed using existing arrangements. 

Essential to this, is the adoption of a coherent PPP policy statement (see section I), and the 

issuance of Ministerial Regulations that stipulate the policy parameters, and necessary 

“guidelines and procedures” to undertake PPP effectively until such time that a more 

comprehensive PPP legal apparatus is required and completed. It is recommended that the 

Ministerial Decree be issued by the Ministry of Finance and that it articulate the policy 

objectives, parameters and procedures of the PPP “project life cycle” as well as the role of the 

Privatisation Commission, Ministry of Finance, and other agencies in facilitating, approving, 

and monitoring PPP transactions in Malawi. This would include the issuance of PPP 

“guidelines and standard operating procedures” that would clarify the roles, responsibilities, 

and authorities of all parties in the development and implementation of PPP transactions in 

Malawi including the risk management aspects of public financial resources and the role of the 

PPP Unit. 

In this report we have prepared an outline of the PPP Act that provides a legal basis for Public 

Private Participation in both: 

‣ Purchase of, and management of, existing assets (Privatization); and 

‣ Investment in, and management of, new assets (PPP). 

In the interim stage the Ministerial Regulations under the Public Financial Management Act will 

serve as the basis for the PPP program and to develop a adequate level of PPP “deal flow” until 

the recommended PPP Unit is established. 

Background to the Recommendations:Amend Existing Law or Enact New Law? 

A considerable amount of time and effort was invested by the IP3 team and our counterparts in 

Government in deciding whether to amend existing law or enact new law in order to provide 

the necessary legal basis for a new National PPP Program. 

The factors supporting enacting a new law included: 

1 

In this Final Report, we have not incorporated the many suggestions for the name and final legal status of the PPP Unit. There are 

suggestions to call it the PSP (Private Sector Participation) and or PSP Unit etc. This Final Report will use the more ‘generic’ term 

PPP Unit throughout 



Final Report 

o 

o 

o 

o 

Amending an existing law could take just as long as enacting a new one; 

The purpose of an existing law might be diluted or distorted by amendment; 

Enacting a new law might avoid a need to amend multiple laws; and 

PPP could be mobilized without the “baggage” of privatization. 

The factors supporting amending an existing law included: 

o 

o 

o 

o 

The flow from Privatization to PPP is a continuation, not a change, in direction; 

Both Privatization and PPP fit within the them of Public Private Participation; 

The PC would have its mandate expanded, whereas if a new law were to be enacted, the 

PC would have to be transformed into a new entity; and 

If there were two separate laws, one for Privatization and another for PPP, how would 

both be done within one organization? 

Institutional Design Implications 

While the points in favor of enacting a new law were quite persuasive from a legal point of 

view the approach continued to “bedevil the consultancy” as we considered the many 

institutional implications. It is quite common for countries to have separate legislation for 

Privatization and PPP.. There would have continued to be a Public Enterprise (Privatization) 

Act, along with a new PPP Act. In countries where such separate legislation exists, the 

implementation of those laws and regulations is usually also separate. The international 

experience has been that this separation can cause privatization to languish while PPP moves 

forward. We wanted to avoid creating a design that that could result in that kind of problem in 

Malawi, but also reflects that privatization has a “life span” whereas PPP is an ongoing and 

evolving tool for infrastructure development and improving service delivery. 

Some of the skills required for PPP transactions are similar to those required for Privatization 

transactions, and those skills already exist within the PC. When considering setting up a PPP 

Unit, at least on an interim basis, the PC should not be left behind to only conclude its 

privatization program when many of the skill sets and experience to facilitate PPP project 

development is in place and that capacity is rare in Malawi. .Nor would it make sense, on an 

interim basis, to create two separate new institutions, incur additional costs, and run the risk of 

leaving privatization behind in terms of Government’s focus of support. So from an 

institutional framework point of view, at least on an interim basis the responsibility for 

developing PPP projects, procedures and pilot transactions as well as conclude existing 

Privatization transactions can and should be under one roof 

But which roof? Merge the PC into a new PPP Unit, or merge a new PPP Unit into the PC? The 

problem with either merger scenario is that Privatization and PPP are not the same, so doing 

PPP in the long- run, under a Privatisation Commission didn’t make sense, and the other option 

of doing Privatization under a PPP Unit seemed a bit of a stretch in the concept of PPP. Malawi 

is a small country and there is a strong desire by the Government to limit or reduce the number 

of its institutions wherever possible. This is a clear case where the PC, can support the transition 

period of PPP program and project development until the enactment of PPP legislation 



Final Report 

Bear in mind, that Line Ministries will still be primarily responsible for implementation of PPP 

transactions under their sectoral mandate. The role of the PPP Unit, is simply to guide, facilitate, 

and provide quality control on PPP projects so that “best practices” are achieved, and the 

interests of the GOM, consumers, and investors are addressed fairly and transparently. Thus, 

the adherence to guidelines, standards, and procedures is a function that the PPP Unit must 

achieve, and that, with the authority of a Ministerial Regulation from the Ministry of Finance, 

can be enforced. This also includes the diligent oversight of public financial resources that can 

also stem from the legal authority of the Public Financial Management Act. 

Thus, from an institutional framework perspective, we also recommend a two-stage approach, 

with the current PC acting as the interim structure to establish ‘PPP deal flow’ until more 

comprehensive PPP legislation is enacted and a work program to justify the establishment of a 

specialist PPP Unit. In the interim the name of the Privatisation Commission (PC) would 

remain, until such time the PPP legislation is enacted and a more formal and permanent PPP 

Unit established. Another, though less important consideration, was that the National PPP 

Program is also part of the National Private Sector Development (PSD) Program, which is to 

receive substantial donor support. A PPP Unit would interface naturally with a PSD program, 

and coordinate effectively with Ministry of Trade and. Private Sector Development (MoTPSD) 

This approach to the PPP Legal Framework will enable the PC to continue its current 

privatization and concession activities while also laying the groundwork for a quasiindependent 

PPP Unit that would operate under the aegis of the Ministry of Finance 

National PPP Program: Policy, Guidelines and Standard Operating Procedures 

Although PPP activity is already underway in Malawi, the activity is fragmented and lacking in 

necessary coordination. To enable such coordination, Government needs to adopt the a clear 

and comprehensive National PPP Policy, a draft of which is included in this report.. In order to 

implement the Policy, Ministerial Regulations are recommended as a possible presage to an 

overall PPP Act. In order to implement the Ministerial Regulations and catalyze PPP 

immediately, it will be necessary to prepare PPP Guidelines and Standard Operating 

Procedures, that will be followed by all stakeholders and enforced by the PPP Unit over time. 

In designing and implementing a National PPP Program, it is essential that the result does not 

create a new layer of bureaucracy that could actually impede the PPP activity already 

underway. There are already “cells” of PPP experience and expertise in some parts of 

Government, such as the Ministry Economic Planning and Development (MoEPD), and to some 

extent in the Ministry of Transport & Public Works (MoTPW), the Ministry of Irrigation and 

Water Development (MoIWD) and Ministry of Health and the Ministry of Information, 

Communication & Tourism (MoICT). In designing the structure, policies, and operations of the 

National PPP Unit, the IP3 team recommends making the Unit a transaction support, due 

diligence, and information dissemination body, rather than a supervisory body through which 

all PPP stakeholders must pass. This design differs somewhat from countries in which the 

political culture is accepting of vertical hierarchy. It accommodates the consensus-building 

culture of the Malawi political environment. 



Final Report 

Action Plan for PPP Program: 

The following key steps are necessary to keep the momentum in establishing and managing an 

effective PPP program. They are discussed in more detail in the body of the report. 

‣ Key Miniseries to jointly sponsor a PPP Cabinet Paper (based on PPP Policy paper set out 

in this Report) 

‣ Enact and Publish a ‘draft’ National PPP Policy 

‣ Consult stakeholders on the proposed ‘draft’ PPP Policy 

‣ Draft Ministerial Regulations on PPP 

‣ Draft PPP Guidelines and Standard Operating Procedures as attachments to the 

Ministerial Regulations 

‣ Assess PPP ‘deal flow’ and begin PPP Pilot Project Development 

‣ Finalize Design of a Project Development Facility to invite Donor Support 

‣ Establish a PPP Unit to Implement the PPP Guidelines and SOP’s 

‣ Develop Model PPP Contracts and/or Concession Agreements 

‣ Develop Standard PPP Procurement Documents and Procedures 

‣ Conduct Transaction Assistance and PPP information dissemination 

‣ Conduct Training/Capacity Building at Central, Regional & Local level 

Governance and Regulatory Implications of Proposed PPP Framework 

Because the regulatory framework in Malawi is under-developed, the PPP program will require 

the formulation and utilization of Model Contracts for each of the sectors in which PPP activity 

will be undertaken. The purpose of the Model Contracts is to provide parties to PPP contracts 

with the protections that would otherwise be provided by independent regulators. Along with 

these Model Contracts, the National PPP Policy and its related PPP Act and PPP Regulations, 

must provide highly specific policies and procedures for PPP procurement. We emphasize that 

the use of contracts to provide the protections that would otherwise be provided by 

independent regulators is an imperfect science filled with risks of unanticipated disputes. The 

PPP Program must place a heavy emphasis on developing the regulatory framework as quickly 

as possible. 

In implementing a PPP Program, it will be necessary to issue new Standardized Procurement 

Documents and Procedures because PPP procurement is significantly different from traditional 

procurement. PPP requires a business orientation similar to that of private sector joint ventures, 

while in traditional procurement the arrangement is relatively simple: Government is the buyer 

and the private sector is the seller. In order to provide guidance regarding the complexities of 

PPP business relations, and their related risk allocation mechanisms, it is necessary to write 

entirely new sections of the procurement regime. One way to do this would be to have all of the 

Government agencies involved in procurement, especially the Office of the Director General of 

Public Procurement (ODGPP), modify their existing procurement policies, regulations, and 

procedures. 

Another option would be to include new PPP procurement policies, regulations, and 

procedures in the Regulations to be enacted or under a new PPP Act. This is our recommended 

approach, because within one body of legislation all of the material can be covered, whereas if 

all agencies modify their procurement policies, regulations, and procedures there will be the 



Final Report 

risk of inconsistency, lack of coordination, and delays caused by internal debate. As long as the 

new procurement policies, regulations, and procedures provided by the Regulations for the 

new PPP Act are not in conflict with, i.e. are supplementary to rather than modifications to, the 

existing procurement policies, regulations, and procedures then the language in the new PPP 

Regulations can be seamlessly integrated into each agency’s existing procurement regulations. 

This has been done successfully in a number of countries. Basically, the approach is to provide 

comprehensive procurement regulations that clarify to line agencies, the public, and the private 

sector: : “if you are using PPP, the following procedures must be followed. All other traditional 

forms of tendering using public funds, will use existing procurement regulations”. 

PPP Unit and Institutional Framework: Key Considerations 

A typical PPP Unit in a country of Malawi’s size should be lean and nimble, but also have the 

capacity to cover a range of functions and grow in scale as the program progresses. The PPP 

Unit should have core technical and management staff and utilize, to the greatest extent 

possible, local and international experts to keep costs down and increase the skills mix available 

to the GOM. 

Most PPP Units have two or three core functions and/or divisions. In Malawi, the PPP Unit 

might have three Divisions: (1) a PPP Transaction Division (with staff addressing Privatization 

as and when requested) ; and (2) a Legal, Contract Monitoring and Compliance Division, which 

will supervise both PPP and Privatization contracts and a 3) Education and Promotion Division 

proactively and reactively work with line agencies in understanding and using the PPP 

guidelines, procedures, and best practices to ensure that PPP projects follow the rules and 

achieve the desired results. 

There should also be a Project Development Facility (PDF) which would have a separate legal 

status (trust account), but would have its own budget from Government and/or donor grant 

resources, from which the PPP Unit would access funds to engage consultants to prepare 

feasibility studies for PPP projects. The PDF would operate as a cost-reimbursable fund that 

would hire foreign and local experts to advise various line agencies on the PPP transaction 

process. In order to utilize the funds and the expertise, line agencies would have to follow the 

PPP guidelines laid out by the Regulations and procedures of the PDF. Moreover, bidders on 

PPP projects would have to agree, in advance of submitting bids, to reimburse the PDF for a 

agreed upon amount to cover the costs of bidding, which ultimately reduces transaction costs 

for both the GOM and the private sector. The PDF’s ultimate goal is to promote a transparent 

and efficient process to conduct PPP transactions and to develop the highest quality of bankable 

and affordable projects possible. 

I.A. 

PPP Unit Human and Financial Resources 

Regarding staffing of the PPP Unit, the expertise required to cover all phases of the Project Life 

Cycle (which includes project identification, appraisal, development, structuring, tendering, 

negotiation, contracting, and monitoring) should include those listed below 

o 

Economic and Financial analysis 



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o 

o 

o 

o 

o 

o 

Financial risk analysis & risk assessment; 

Asset management & engineering assessment; 

Transaction negotiations, both legal and financial; 

Legal agreements/contract preparation and management; 

Project appraisal (affordability, risk allocation, and value for money) 

Public awareness, outreach and education. 

In infrastructure, the long-term project risk of up to 20 to 30 years can be enormous if the PPP 

Unit does not have the above-described expertise and access to experienced PPP specialists. As 

is the case in most countries, much of this experience should be acquired from the local and 

international private sector. While GOM capacity is high and the experience in some agencies is 

substantial, the requisite depth and breadth of PPP experience will likely have to be outsourced. 

Of course, in the long run, this also saves operating costs, as the PPP Unit will be able to add 

more resources as required. Therefore, competitive recruitment will be required as well as the 

need to solicit funding, both from GOM and donor sources to finance operating expenses and 

consultant services. 

Best practices in other countries, as well as considerations in Malawi, influence what the PPP 

Unit should resemble. In general, we suggest commencing with a small initial team of 

approximately 4-5 personnel until such time that a) the ‘deal flow’ is identified and matures, b) 

Long term PPP legislation is established and c) Outsourcing of experts to develop and oversee 

PPP transactions is mainstreamed. 

Within this report we anticipate that the mature PPP Unit at its final stage (3-5years plus) will 

have a small but flexible team of 10 or more professionals, overseen by a Managing Director 

with Division or Practice heads. These managers will need to be able to oversee and manage 

external consultant inputs, as well as liaise with donors to maximize the effectiveness and 

utilization of grant funding. The PPP Unit will need to be scalable and demand driven, and its 

management will need to be proactive in initiating things like stakeholder awareness, training 

and capacity building, dissemination of information relating to PPP, standardization of PPP 

procedures, and the local and international marketing of PPP project opportunities. The need to 

scale up to these ‘mature’ levels will be determined by impact and demand for services, 

including high growth areas such as municipal PPP’s rural PPP’s, and social PPP’s such as 

health and education, in addition to traditional economic infrastructure. 

PPP Unit Interim and Long Term Roles and Institutional Relationships 

After considering several options and after examining a number of existing Government bodies, 

such as, MOF/PERMU, OPC, DSC, the PC, MoTPSD and its MIPA, MoTPW, and the status of 

MoEPD, we have narrowed down our analysis to one preferred option (see Figure 1 below) In 

attempting to utilize existing expertise, PERMU and the PC offered the most promise, however 

not without some institutional alignment issues, as well as limitations of staff resources in 

PERMU and the present physical location of the PC. We also took into consideration the 

Privatization Unit’s workload and how the PC would be (or would not be) able to fully or 

partially integrate PPP activities within its current mandate or an expanded mandate. 



Final Report 

It will be essential to ensure that PPP Unit should report directly to the Office of the President & 

Cabinet (OPC) with delegated powers through the MoF (see suggested relationship in Figure 1 

at the end of this Executive Summary) The most effective PPP Units manage, directly or 

indirectly, sovereign financial risk and utilize the “powers of the purse” thus in Malawi, some 

kind of formal relationship with MOF is highly recommended while still having linkage to the 

highest level of political support, under the Office of the President and Cabinet. Given the 

above-described objectives and criteria, a critical issue is the need for the PPP Unit to ultimately 

be placed within the Ministry of Finance (MoF)or to set up as a semi-autonomous body. 

In Figure 1, we show the recommended “post-interim” structure, in which the PC’s current , but 

later descending privatization activities are continued within the new PPP Unit, and the Head 

of Unit reports to the Minister of Finance, who in turn is accountable to the Office of President 

and Cabinet at the broad policy level. Interaction between the Unit and MoEPD is included 

because the Unit can only accept projects that have been approved by MoEPD for inclusion in 

the annual Public Sector Investment Program (PSIP) and with MoTPSD because the PPP 

program is a component of the private sector development (PSD) program for which MoTPSD 

is the lead agency. 

PPP Institutional Framework and the Regulatory Regime 

Having a strong and effective regulatory regime is a necessity to attract large-scale private 

sector investment. To date, the regulatory regime in Malawi is insufficient to attract private 

capital and efficiency in key sectors. Current regulatory arrangements do not adhere to many of 

the criteria set down internationally for regulators. Regulatory officials in Malawi are 

technically competent in their fields, but are lacking in security, continuity, independence, 

and/or insulation from economic influence. Prospective private operators and investors will 

“price” the added risk created by this inadequate regulatory environment, causing their 

targeted rates of return on investment to be higher than many potential PPP projects can offer. 

This places greater strain on PPP projects, which must be structured to be affordable to both 

consumers and government, bankable in the sense that private capital can be attracted, and 

financially efficient so as to enable Government an acceptable value for money. 

The standards currently applied in regulating energy and telecommunications will not meet 

international standards for PPPs. In transport, there is currently no independent regulator; 

regulatory functions are fragmented across the Ministry of Transport and Public Works 

(MoTPW), Maine Services Directorate (MSD), Department of Civil Aviation, and the National 

Road Safety Council, etc. There are proposals to set up a TransRA in order to provide 

independent regulation, along with an independent Civil Aviation Authority (CAA), but at the 

present time transport regulation rests within Government, thereby subjecting it to political 

influence. 

The international PPP investor has a choice of many different countries in which they can invest 

and regulation is one of the deciding factors. A country that can score well on the following 

factors might attract significant international private investment: 

A stable, free market driven economy; 

Open and active financial and capital markets; 



Final Report 

Minimal government interference in trade and investment; 

Efficient unbiased legal system and dispute resolution mechanism; 

Stable political environment with flexible pro-business policies; and 

A politically and financially independent predictable regulatory regime. 

Note that investment incentives are not included in the list above. The key consideration for 

private sector investment decisions is whether the factors listed above create a “level playing 

field” in which investments can be made without; 

o 

o 

o 

o 

o 

Unacceptable risk that government will fail to honor its contracts, 

Interfere in the economy in ways that distort exchange rates and the mobility of 

capital, 

Adopt policies in the future that are not friendly to business, 

Not provide timely and equitable resolution of disputes through its 

administrative and legal venues 

Fair, equable, transparent and consistent regulator. 

There has to be a clear separation of the regulatory role(s) and the role of government agencies 

undertaking PPP projects, e.g. a line ministry generally cannot be both party to a PPP deal and 

the regulator for that transaction. Therefore, as the new PPP Unit commences its activities there 

will be a need to simultaneously establish independent regulators, preferably under a Multisectoral 

regulator to achieve economies of scale. While PPP projects can be implemented in 

Malawi now, most of them will have to be regulated by contract, and monitored by the PPP 

Unit or line agency until such time that the regulatory framework and organizations in Malawi 

are operational and functional. The interim report has recommended strategies to harmonize 

PPP functions and regulatory functions, either through streamlining and enhancing regulatory 

approaches or by strengthening such capacity through regulation by contract. 

Roles and Relationships between the PPP Unit and other Institutions 

In order to eliminate duplication of PPP functions, which would not be sustainable in the longer 

term, we must take into account plans and relationships amongst the various institutions. For 

example, there are proposals for the merger of MIPA and the MEPA under the MoTPSD. There 

has been extensive debate on the possible merger of the DSC and the PERMU under the OPC 

and the MOF, respectively. There is also debate on the future funding, role, and work-plans of 

the PC under OPC. Finally, MoEPD’s large pool of economic and monitoring and compliance 

experience raises the issue of what role the PPP Unit’s Division of Monitoring and Compliance 

will perform. 

In addition, there are already many enabling and supporting roles for the various organs of 

state to support successful PPP investment institutional oversight, in addition to regulation, 

including, but not limited to the following: 

• Financial risk and risk transfer; 

• Procurement procedures and compliance; and 

• Dispute resolution procedures. 



Final Report 

Procurement: the Office of the Director General of Public Procurement is ideal for supporting 

PPP oversight. It has a Monitoring and Enforcement Department, and a Regulation Advice and 

Review Department, which potentially fit neatly with the oversight role required for PPP 

without being overbearing and directly controlling. Although the PPP Program will develop its 

own procurement policies, regulations, and procedures the ODPP will provide essential 

oversight support. 

PPP Dispute Resolution: In order to attract private investment, it is necessary to have contract 

dispute resolution procedures that are clear, transparent, unbiased, and not excessively time 

consuming. Formal court procedures can be slow and adversarial, leading to breakdown of 

relationships and above all costly in terms of trading losses and legal fees. The effectiveness of 

the legal system is a critical element for investors in the decision to enter a PPP arrangement. 

Therefore, in PPP it is best if there are alternative ‘fast track’ dispute resolution approaches that 

support the PPP principles, requiring sector regulatory disputes procedures, mediation services 

and international arbitration. These forms of dispute resolution are independent, objective and 

above all, have expert knowledge of the sector to resolve financial, technical and legal issues. 

They can be referenced or required in the PPP bidding documents and the PPP Unit can 

disseminate information about how they are utilized.. 

Regional and Local Government: PPP support cannot be only a central government activity. 

There is a need for regional and local government bodies to be proactive by identifying and 

sponsoring PPP projects. One way to accomplish this is to have the PPP Unit assist such bodies 

in the formation of PPP Cells at the local level. One of the major factors determining the success 

of PPP in South Africa and elsewhere was the level of additional support local authorities, 

provincial government institutions, and even community councils received to assist them 

determine if their infrastructure needs could be met with PPP approaches. The PPP Unit should 

develop an action plan to train local government officials to understand “small scale” PPP 

approaches and strategies 

The PPP Unit and the Project Development Facility PDF) 

We have proposed that the Privatisation Commission (PC), on an interim basis, take the lead in 

mobilizing the new national PPP program, so that PPP activity can be commenced without 

delay and can continue while the above-referenced legislation is enacted. Under its present 

mandate, the PC is allowed to conduct PPP activities that involve concessions 

The suggested structure and reporting relationships of the PPP Unit is provided in Figure 1 

below. The PPP Unit should report to Ministry of Finance (MoF) as an external semiautonomous 

legal entity, but decisions made by the Minister of Finance regarding the Unit must 

be consistent with the relevant policies set by the Office of the President and Cabinet (OPC). 

The privatization activities currently conducted by the PC will be continued in the PPP Unit, 

along with the full range of PPP transactions. Within the PPP Unit design is a Monitoring and 

Compliance Unit for supervision and enforcement of Privatization and PPP Contracts. 

Reporting to the PPP Unit is a financially and politically independent Project Development 

Facility (PDF) to facilitate deal flow and pay for the costs of PPP project development and 

transaction advisors. 



Final Report 

The PPP Unit must report to the Ministry of Finance because the rationale of both Privatization 

and PPP is to reduce the financial burdens of service delivery (in the case of privatization) or to 

maximize the “value for money” of public investment (in the case of PPP). One would not want 

a PPP Unit involved in such high value, and politically sensitive, activities to be tied strictly to 

any particular ministry, hence the need for it to have access to the OPC in order to create a 

system of checks and balances. 

This arrangement also helps to dispel any misperceptions that the PPP Unit is simply an arm of 

the Ministry of Finance, which could create resentment among some of the other line ministries. 

At an operational level, any decision by the Minister of Finance can be appealed by application 

for review by the OPC. Note also the horizontal lines in the diagram provided below, from the 

PPP Unit to the Ministry of Economic Planning & Development (MoEPD), and to the Ministry 

of Trade & Private Sector Development (MoTPSD). 

The PPP Unit has “budget accountability” to MoEPD because the Unit is not allowed to 

support any projects that have not received MoEPD approval through the inclusion of the 

project in the Public Sector Investment Program (PSID). The PPP Unit has “program 

accountability” to MoTPSD because the PPP activities that it undertakes must be consistent 

with, and supportive of, the policies and objectives of the Private Sector Development Program 

funded by the World Bank and implemented via the MoTPSD. At an operational level, this will 

mean that when the PPP Unit evaluates and structures Privatization and PPP transactions, 

which s a conceptual possibility, it must take into account the transactions’ anticipated impact 

on Private Sector Development. 

The PDF is a facility that will be grant funded and contract with private sector (local whenever 

possible) consulting firms to prepare pre-feasibility and feasibility studies for PPP projects. Prefeasibility 

studies will be necessary in order to publish Requests for Expressions of Interest, and 

feasibility studies will be necessary in order to publish Requests for Proposals. These studies 

will not serve as substitutes for investor due diligence or comprehensive studies required to 

secure project finance. 

The PDF should be financially independent because it has its own budget, independent of the 

PPP Unit, funded primarily by donor grants. This will attract donors that are interested in 

funding specific sectors or policy objectives without limiting the goals of the PDF or PPP Unit. 

Thus, its governing board will include donor nominees. The relationship with donors provides 

some political independence as well as gives donors a “seat at the table” in targeting key 

objectives such as improved water supply access, or reduce new cases of HIV/AID’ s through 

investments in health, or improve access to ICT services, etc Access to PDF funds by line 

agencies will be only through the PPP Unit, which evaluates proposed PPP projects and selects 

the ones that it considers appropriate for PDF assistance and for line agencies willing to follow 

the rules and procedures of the PPP program and the PDF operational guidelines. 



Final Report 

Figure 1 – PPP Unit Institutional Roles and Reporting Framework 

MOF – Operating within OPC Policies 

MOEP 

(Budget Accountability) 

PPP Unit 

MOTPS 

(Program Accountability) 

PDF 

PPP Transaction 

Monitoring & 

Compliance 

Education & 

Promotion 



Final Report 

II. 

INTRODUCTION AND RATIONALE 

Over the past several months, the IP3 team has conducted extensive field research, interviews, 

and reviews of existing reports in order to formulate a comprehensive plan for Government to 

create a policy, legal, and institutional framework for PPP. At the end of this research and 

analysis period, the team prepared a draft Cabinet Paper, for the Minister of Finance to present 

to Cabinet, proposing specific actions that could be undertaken by Government in order to 

establish such a PPP framework. This Final Report serves as both an update of our previous 

reports and a Road Map for implementing the PPP Program in Malawi. 

The Global Transition from Privatization to PPP 

Along with numerous other countries, Malawi has been conducting Privatization in an effort to 

shift the burden of service delivery onto the private sector. This has been done by transferring 

the ownership and control of public enterprises to the private sector, with the objective of 

having services performed by those public enterprises subsequently performed by private 

enterprises, thereby relieving Government of the costs associated with owning and operating 

public enterprises. 

The Public Enterprises (Privitisation) Act provided the legal mandate for such transfers of 

ownership and control of existing facilities. As we now approach the point at which most of the 

existing facilities have already been sold or contracted to the private sector, it is necessary to 

mobilize a PPP program to enable private sector participation in the operation of new facilities. 

It is important to keep in mind that the evolution from privatization to PPP should be treated as 

an evolution, not a radical shift in direction. In many countries, some political elements have 

tired of the privatization process and all of the negative publicity it tends to attract, caused by 

the common misperceptions that the privatization process always involves massive layoffs of 

workers, giving over control of valuable assets to foreign interests, selling off things that 

government should own to protect the public interest, etc. Our advice to those elements is “be 

patient just a little while longer” and allow the natural process of evolving from privatization to 

PPP take its course with enough time to manage the transition without a radical shift in policy. 

International Transition Models and Options for Malawi 

Managing the transition from privatization to PPP is a delicate and complex task, but 

fortunately Malawi is not alone in this mission. Many countries are going through the same 

process, and some have already gone through at least the initial stages of the transition, so there 

are some international models that can be used as guidelines. Most of the challenges relating to 

the transition are not in the area of policy, which can evolve naturally and without any radical 

changes, but rather in the areas of institutional setup and enabling legislation. In Malawi, and 

in many other countries, one could in theory launch a national PPP program very quickly by 

simply issuing some PPP standards and guidelines. There is already PPP activity underway in 

Malawi, so maybe the only need is for Government to provide guidelines on how to do it 

correctly. 



Final Report 

If Government envisions its role as limited to providing guidance, indeed it would be a realistic 

option to mobilize the PPP program by simply issuing such guidelines. If the Government, 

however, wants to exercise a greater degree of control over the PPP regime then it would be 

necessary to at least promulgate some new PPP regulations. If this is the plan, then one must 

select the appropriate law under which to issue the regulations. 

Most of the international models cited as examples of highly successful PPP programs are 

countries in which the PPP program was launched by PPP regulations issued by the Ministry of 

Finance or the National Treasury. Examples include South Africa, the U.K., Ireland, and 

Australia. But in considering these models, one must take into account any differences in 

political culture that might exist between Malawi and those countries. In all of those countries, 

there is a political culture that accepts vertical hierarchy and focus of decision-making at high 

levels of central government. In some countries, Indonesia for example, the post-independence 

political culture has shifted radically from the old days of government control to a new wave of 

excitement about democracy, popular participation in national policy, and decentralization. 

Because of this emerging political orientation, it was not possible to design a PPP program with 

a strong decision-making body in the central government. The Government of Indonesia opted 

for a coordinating body, housed in the Coordinating Ministry of Economic Affairs, and was 

very careful not to put strong decision or approval language in the PPP enabling legislation. So 

in Malawi, it will be necessary for Government to decide whether the political culture will 

tolerate a central government decision-making and authorizing body. 

Mobilizing the PPP Program by Issuing PPP Regulations 

If the decision is made that such a body would be politically accepted, then issuing new PPP 

regulations is the best way to mobilize a national PPP program. Our research has indicated 

that, although there is some sensitivity in the line ministries, and perhaps in local government, 

regarding having to request approval from a central government PPP decision-making and 

authorizing body, generally the political culture would be likely to accept such a body, as long 

as it did not end up being just another layer of bureaucracy. 

Based on this premise, we could proceed with a plan to issue new PPP regulations, but first we 

must select the law under which the new regulations would be issued. The best way to decide 

which law to use is to examine the cornerstones of PPP, i.e. affordability, risk allocation, and 

value for money. In the private sector, those decisions are made all the time, and in a 

corporation those decisions are made by the Treasurer. When a new project is proposed, the 

Treasurer must first check the budget to confirm that funds are available, or funds could be 

made available, for the project. The next step is assessment of the financial risks of the 

transaction. Working closely with Corporate Counsel, the Treasurer must examine the 

proposed contract and identify what adverse consequences might occur, causing an adverse 

impact to the budget. Risks include not only what are specified in the contract explicitly, but 

also contingent liability risks that the contract will impose upon the company. The next step in 

the Treasurer’s analysis is an evaluation of the project’s projected Return on Investment, as 

compared with other projects that can be undertaken with the same level of investment. 



Final Report 

Rationale for Role of Ministry of Finance in PPP Program 

This analysis and decision-making process is the same as that conducted by a national Treasury 

in government, except that the term Value for Money is used instead of Return on Investment 

because government is not only looking for financial returns, it is looking also at economic 

returns, i.e. the social benefits of the project. 

So the kinds of decisions that have to be made in assessing PPP projects are those that are 

naturally performed by a national Treasury or Ministry of Finance. This indicates that the 

logical choice of law under which to issue the new PPP regulations would be a law that 

empowers the Minister responsible for finance to control decisions regarding the prudent use of 

public funds. In Malawi, that is the Public Finance Management Act. 

Legal Basis of PPP Program 

The Public Finance Management Act (PFMA) provides the power for the Minister of Finance to 

control decisions regarding the prudent use of public funds, and it also gives us the reporting 

structure needed to implement that authority, by designated persons in the relevant 

government bodies as Accounting Officers. Their responsibility is not only to keep an 

accounting of how their organization has used the public funds that have been entrusted to it, 

but also to ensure that the funds have been used in an efficient and effective manner. It doesn’t 

take much of an intellectual leap to issue regulations that say every major project finance 

expenditure must at least consider the use of PPP as an option for leveraging public funds with 

private investment. If such a project were to be proposed for budget appropriation and there 

was no PPP options analysis included in the project proposal, the Treasury could reject the 

proposal on the grounds that the Accounting Officer failed to consider a mechanism that could 

enhance the efficiency and effectiveness of the expenditure of those public funds, the PPP 

mechanism. 

The PFMA thus provides the logical underlying legal basis, as well as the reporting structure, 

for issuing PPP regulations. At this point, however, we must take as step back and re-visit the 

privatization program. If we ignore the privatization program, for which we all spent a great 

deal of time, effort, and money to set up the institutional and legal framework, and then endure 

the many years of policy debates, we are potentially giving up the opportunity to use an 

existing vehicle to launch the PPP program, while we press forward by issuing PPP regulations 

under the PFMA. It will take time to get the regulations agreed, passed, and implemented. 

Stakeholder organizations will want us to provide Operations Guidelines and Standards 

manuals so they will know exactly how they are supposed to comply with the regulations. 

Government and donor budget cycles will require at least six months to a year to put the money 

in place to pay for the national coordinating and decision-making body that will have to be put 

in place for the processes required by the regulations to be implemented. 

These practical matters point definitively to the need to use the privatization apparatus as an 

interim implementing agency for the PPP program, until the full policy, legal, and institutional 

framework for PPP can be put into place and funded. 



Final Report 

Use of the Privatisation Commission as Interim PPP Vehicle 

The Public Enterprises Act empowers the Privatisation Commission initiate concessions. 

Nearly all PPP transactions involve some form of a concession agreement. Technically, such 

concessions are intended to apply only to existing facilities, not new facilities, so it might be 

considered a bit of a stretch in the privatization legal framework to ask the PC to undertake 

BOO, BOT, and BOOT transactions that involve new facilities. One way to solve this could be 

to amend the Public Enterprises Act to insert PPP language that gives clear authority to enter 

into concession arrangements involving new facilities. But such amendment processes take a 

lot of time and effort, while we are looking for something that will enable a PPP program to 

mobilize quickly. In Uganda, the Public Enterprise Reform and Divestment program is making 

its transition from privatization to PPP and the Government of Uganda is not “splitting hairs” 

over the theoretical difference between PPP and privatization. Rather, they are focusing on the 

practical factors: (a) why go through all the effort of making a radical shift away from 

privatization to PPP when the transition is a natural global trend and should be achievable 

through a legal process that does not require throwing out the old to create the new; (b) the 

institutional apparatus and already appropriated budgetary funds are already in place for the 

setup conducting privatization, so why not use that instead of trying to set up a PPP apparatus 

overnight; and (c) the skill sets required to do privatization are very similar to the skills 

required to do PPP so why not let the privatization professionals do PPP transactions? 

We agree with this approach and recommend that the Public Enterprises Act, with its authority 

to enter into concession agreements, and the already established and funded Privatisation 

Commission, be used as an interim vehicle to mobilize the national PPP program until the full 

policy, legal, and institutional framework can be put into place, which will take at the very least 

6 months and most likely a year or even 18-24 months. Major new undertakings by any 

government invariably take longer than expected. 

Synopsis of Suggested Approach 

To recap: we recommend mobilizing the national PPP program by issuing regulations under the 

Public Finance Management Act, which will make Accounting Officers the nucleus around 

which stakeholder agency PPP Nodes can be developed, and will make the Ministry of Finance 

the home for a national PPP Unit. 

That is our recommendation, and is the approach that underlies the institutional design 

described in detail later in this report. The institutional design envisages a structure that will 

start off relatively small, and will grow as PPP deal flow increases. The design also envisions 

the immediate designation of a core group of selected professionals in the PC who will be 

responsible for operating the PPP program within the PC as an interim measure, and would be 

transferred to the PPP Unit when it is established and funded. 

The Issue of whether or not to Enact a New PPP Act 

We now turn to the issue of whether a new PPP Act is necessary. It certainly is not necessary to 

enact such a new law just to mobilize the PPP program. Regulations under the PFMA can do 

that quite effectively. But what about the longer-term considerations? Will the national PPP 



Final Report 

program flourish under an enabling legislation that is so far down the hierarchy of legal 

instruments, as compared with a new law? What will potential investors think when they see 

that the program is based on regulations and not law? A regulation can be changed at will at 

any time, with little or no consultation with the law committees of the Ministry of Justice and 

Parliament. The PFMA specifically allows the Minister responsible for finance to pass 

regulations pursuant to the Act. By implication it also allows the Minster to repeal or change 

such regulations at will. Maybe something more is needed to send a signal of stability and 

support to the market. 

In the countries in which PPP has flourished under regulations alone, there is a political and 

economic culture that is naturally receptive to PPP activity. In some countries, e.g. the United 

States, the culture is so naturally accepting of PPP that there is no national coordinating body or 

legislation. But can one say the same of Malawi? Probably not, so we have provided a draft 

PPP Act in the Appendices to this Report for Government to consider if it decides such an Act is 

needed. In other countries, national PPP legislation has been enacted for one or more of the 

following reasons: 

The legal capacity of the various “spheres” of government to contract with the private 

sector for long-term service provision is inadequate and/or unclear; 

The political culture will not tolerate any vertical, hierarchical, decision-making 

structure so a national law is needed to underscore government’s commitment to the 

PPP process, and provide guidance as to how one should do PPP, but does not impose 

strict decision-making systems involving centralized approval; or 

 

Government considers the need to maintain strict control over the PPP process to be too 

important to relegate to PPP regulations, so a national umbrella law is passed to impose 

such control at the highest level. 

Existing Capacity to Contract with Private Sector 

In this consultancy, we have carefully examined the capacity of the various “spheres” of 

government to contract with the private sector for the long-term provision of services. We do 

not see any constraints to such activity sufficient to require a national umbrella act to fill the 

gaps or correct the inconsistencies, which are minimal and can be rectified through internal 

adjustments rather than a national initiative. National gap-filling laws of this type are being 

used in Eastern Europe (the national concession laws) to provide a solution to major 

inadequacies in the contracting authority legal framework. Malawi does not have that degree of 

inadequacy. On the contrary, the legal framework for such contracting authority is relatively 

well developed. 

So the first scenario presented above in our checklist for national legislation does not apply to 

Malawi. The second scenario does not apply either, as we have already shown in our 

examination of the PPP regulations scenario. We see no indication of substantive resistance to a 

central decision-making body, as long as that body is seen as facilitative and not just another 

layer of bureaucracy. 



Final Report 

The third scenario is one that might or might not apply to Malawi. Our suggestion is that 

Government mobilizes the PPP program with PPP Regulations, then monitor how stakeholders 

and investors respond. If stakeholder agencies resist the authority given to the PPP Unit and 

Ministry of Finance by the Regulations, and/or if private investors do not show sufficient 

interest in PPP transactions because they perceive regulations to be only transitory and not a 

sufficient show of commitment on the part of Government, then yes, a new PPP Act should be 

enacted. 

Introduction to the Report 

In the following section on Policy Framework, we present a draft National PPP Policy statement 

for Government to review and consider for publishing. Following the Policy section, there is a 

section on Legal Framework, where we provide summary descriptions of the best 14 options for 

such framework, along with “Pros” and “Cons” columns, then a column for quick reference to 

the most relevant international examples. Then we reduce the 14 down to the best 3 by using 

international best practice options analysis methods. At the end of that section, we use 

subjective analysis to select the preferred option. After the Legal Framework section, we 

present our analysis of the Institutional Framework implications of what we have 

recommended for Policy and Legal designs, along with a detailed institutional framework for a 

PPP Unit that is scaled according to the level of PPP deal flow. Finally, we present a section 

called Road Map, which shows a Road Map for implementing the recommendations presented 

in this report. 



Final Report 

III. 

POLICY FRAMEWORK – DRAFT NATIONAL PPP POLICY 

III.A. Definition of Public-Private Partnership 

A “public-private partnership” is a commercial transaction between a public institution and a 

private party in terms of which the private party: 

(a) 

(b) 

(c) 

(d) 

performs an institutional function on behalf of the state; and/or 

is allowed the use of state property; and 

assumes substantial financial, technical, and operational risks in connection with the 

performance of the institutional function and/or use of state property; and 

receives a benefit for performing the institutional function or from utilizing the state 

property, either by way of: 

(i) consideration to be paid by the institution, which derives from a revenue 

fund or, where the institution is a national government business enterprise or 

a regional or local government business enterprise, from the revenues of such 

institution; or 

(ii) charges or fees to be collected by the private party from users or customers of 

a service provided to them; or 

(iii) a combination of such consideration and such charges or fees. 

A public-private partnership is not privatization because it does not involve the transfer of 

ownership and control of state assets to the private sector. 

The essence of PPP is the allocation of project risk to the parties best equipped to manage those 

categories of risk. Generally, political risk is allocated to the public sector partner and 

commercial risk is allocated to the private sector partner. By allocating risks in this manner, the 

success of the commercial transaction and its future operations are assured. In practice, there 

are always some categories of risk in which both partners must share management 

responsibility. 

In Malawi, the legal definition of privatization includes concessions, which generally in 

international practice are regarded to be PPP. Rather than change this definition, which would 

require amending the Public Enterprise (Privatization) Act, this Policy provides that concession 

agreements made for existing infrastructure will be regarded as privatization, while any 

concession agreements made for new infrastructure will be regarded as PPP. 

The rationale for PPP in Malawi is that it will accelerate infrastructure development by 

leveraging public financial resources with private investment, and it will increase the quantity 

and quality of public services to improve the quality of life for Malawians. All Government 

institutions should use PPP whenever possible in conducting economic and/or procurement 

activities requiring public expenditure. When proposing new projects to be included in 

national budget and the related Public Sector Investment Plan, all Project Sponsors (the 

government body that has proposed the project) shall include an appraisal of whether the 

project should be a PPP. 



Final Report 

III.B. Principles of Public-Private Partnerships 

Affordability to Consumers and Government 

Affordability to Consumers shall be assessed by conducting a Consumer Demand, 

Affordability, and Willingness to Pay Survey, which must be conducted by all Project Sponsors. 

The Survey does not have to be exhaustive, only an indication of how consumers are likely to 

respond to the services to be provided by the project, whether they will be able to afford the 

services if offered at projected prices, and under what service conditions they will be willing to 

pay those prices. When budget resources permit, independent consultants shall conduct such 

Surveys. 

Surveys are required because PPP projects must be demand driven. This is quite different from 

traditional procurement, in which Government makes decisions regarding the projects to be 

implemented and the prices to be paid. In PPP, the emphasis is on service delivery so consumer 

preferences dictate which projects will be implemented and what prices will be paid. The 

responsibility of Government is to respond to such consumer preferences, to the extent that 

resources permit, and leverage those resources by partnering with the private sector. 

Affordability to Government shall be assessed by determining whether the proposed PPP 

project is included in the Public Sector Investment Plan (PSIP) maintained by MoEPD, or fits 

within a category of projects defined as eligible for inclusion within the PSIP. Once it is 

determined that the proposed project can fit within the PSIP, the Ministry of Finance will be 

Government’s representative in determining what public resources will be committed to the 

project. The MoF contact point for this process will be the Debt Management Office’s Risk 

Management Unit. 

If the proposed PPP project is not listed in the PSIP, and does not fit within the kinds of projects 

defined in the PSIP to be appropriate for support by Government’s budget, the MoEPD is to be 

consulted (with technical assistance from the PPP Unit, if requested) for discussions on how the 

project might be included in the following year’s budget. This can be a very time-consuming 

process, and Project Sponsors contemplating a new project are cautioned to start the 

consultative process with MoEPD well in advance of performing detailed feasibility analysis. 

Allocation of Risks between the PPP Partners 

Risk allocation is at the essence of PPP. In traditional procurement, Government takes all the 

design and service delivery risks, while the private sector provider is responsible only for the 

construction and operational risks. In PPP, much of the design and service delivery risks are 

transferred to the private sector, and Government focuses on managing the risks that it is best 

equipped to manage, i.e. political risks. Similarly, the private sector partner manages the risks 

that it is best equipped to manage, i.e. commercial risks. 

In practice, the dividing line between political risks and commercial risks is not so clear. Some 

kinds of risk have to be shared, for example design and engineering risks when the preliminary 

design and engineering has been conducted by Government and the final design and 



Final Report 

engineering has been completed by the private partner. Other risks may or not be shared 

depending on the policy environment, e.g. exchange rate risk. 

The guiding principle in allocating risks is that the role of Government is to ensure that the 

interests of all stakeholders are protected. That includes consumers, who are protected by the 

service standards, and also the private sector partner, for whom the protection of a “level 

playing field” must be provided. The role of the private sector is to deliver the services at the 

specified levels of quantity and quality, at prices consumers can afford. Quantity and quality of 

service delivery is known as the Service Delivery Standards. Prices necessary to maintain the 

Standards are defined by tariff formulae in the PPP contract, and are usually limited by an 

Investor’s Equity Financial Internal Rate of Return that has been agreed upon during contract 

negotiations. 

In PPP contracting, there are as many as three parties representing Government. The first is the 

Contracting Authority. This is the entity that executes the PPP agreement, and which has full 

responsibility for Government’s obligations under the agreement. The second is the Executing 

Agency. This is the entity responsible for implementing the acts for which Contracting Agency 

is responsible under the PPP contract. The third is the Regulator. This is the entity that serves 

to protect the interests of all stakeholders to the PPP agreement, i.e. Government, the private 

sector partner, and the consumers. There should be inter-agency written agreements that 

clearly convey the Contracting Authority’s right to legally obligate the other agencies to 

obligations they have in the PPP contract. The Regulator should be politically and financially 

independent. It is essential that the roles and obligations of these parties be clearly defined in 

the contract. 

Value for Money to Leverage Fiscal Resources 

From a fiscal budgeting standpoint, the concept of value for money is at the core of the PPP 

approach. It is difficult for Government to build and operate all required infrastructure and 

provide required services without private investment to leverage public fiscal resources. 

The concept of value for money is that the projects to be selected will be those that will provide 

the highest quantity and quality of service provision for a given amount of public expenditure. 

In evaluating bids for PPP projects, the focus is different from traditional procurement, which is 

to select the bidder that can provide the specified product or service at the lowest price. In PPP, 

the winning bidder should be the one that provides the highest quantity and quality of service 

delivery, given a particular level of public expenditure, not necessarily the bidder with the 

lowest cost to Government. For example, a bidder offering a high level of service delivery at the 

maximum level of Government investment allowed could prevail over a bidder that offered a 

significantly lower level of service delivery at a cost to Government that is less than the 

maximum allowed. 

III.C. Role of the National PPP Unit and PPP Nodes in PPP Projects 

An important aspect of the PPP program is that all stakeholders have a key role to play in the 

PPP project development process. While the National PPP Unit represents the nation’s key 

focus of expertise in PPP, the Government institutions that propose PPP projects play a critical 



Final Report 

role in the selection and initial development of PPP projects. PPP projects are normally 

proposed by Central Government sector ministries, and/or by regional and local Government 

agencies. Within each such Government ministry or agency, there should be a core group of 

people who are familiar with PPP. This group, called a “PPP Node,” works closely with the 

national PPP Unit in the identification, development, appraisal, structuring, financing, and 

contracting of PPP projects. The national PPP Unit will give technical assistance, including 

capacity building, to these PPP Nodes. The primary purpose of the National PPP Unit is to 

provide expert assistance, disseminate information, and build capacity in PPP. The role of the 

National PPP Unit is not to impose another layer of bureaucracy in implementing PPP projects. 

Rather, it serves as a resource to the PPP Nodes and other PPP stakeholders. Its dissemination 

of information function includes standardized procurement documents and procedures. Its 

capacity building function includes PPP training programs at all levels of Government. 

III.D. Role of the Project Development Facility (PDF) 

The Project Development Facility is a financially and politically independent managed fund 

that contracts with private sector consultants to perform feasibility analysis for PPP projects. 

The PDF responds to requests from the PPP Unit for feasibility analysis and recruits the 

necessary consultants, from local firms whenever possible, to perform the work. In order to 

expedite the selecting and contracting process, the PDF maintains a list of consulting firms that 

have been pre-qualified in accordance with established criteria. Qualified firms are invited to 

submit their Qualifications once per year, for the PDF to consider in developing the list of prequalified 

firms. 

The PDF funds pre-feasibility studies to assist Project Sponsors in preparing their Requests for 

Qualifications, and feasibility studies to support Project Sponsors in preparing their Requests 

for Proposals. Project Sponsors may access such PDF assistance only through the National PPP 

Unit. The feasibility analysis performed by consultants contracted by the PDF does not include 

investor due diligence, nor does it include the highly detailed and comprehensive analysis that 

is required for an investment or loan solicitation. Such detailed analysis must be performed by 

the private sector firms that submit proposals to become partners in PPP projects, and in the 

bidding documents Government shall disclaim any representation or warranty of the 

information provided by the PDF-funded pre-feasibility and feasibility studies. 



Final Report 

IV. 

LEGAL FRAMEWORK 

In order to encourage private sector participation in the provision of services needed by its 

populace, and to reduce the fiscal burdens on government for such service provision, the 

Government of Malawi has implemented a Privatization Program. 

In order to encourage private sector participation in the provision of services needed by its 

populace, and to maximize “value for money” in its fiscal expenditures for provision of such 

services, Government will implement a Public-Private Partnership Program. 

Malawi is moving toward a situation that is becoming increasingly common around the world: 

privatization programs are winding down toward conclusion, leaving relatively few divestment 

activities that remain to be conducted by government. IP3 is consulted by many countries as 

those programs approach this stage in their privatization activity, seeking guidance on how to 

make the transition from privatization to PPP. 

PPP is indeed the next “wave” after Privatization. As the first two paragraphs of this section 

indicate above, the unifying theme is Private Sector Participation (PSP). When it is necessary to 

divest of government-owned assets in order to enable the private sector to participate in the 

provision of services previously provided by government, it is the Privatization methodology 

that is used. 

As a Privatization Program starts nearing the end of its useful life, i.e. as the inventory of 

government-owned assets suitable for divestment starts to wind down, it is in a natural course 

of events that PPP emerges as the next phase in PSP because when there are no more existing 

service provision facilities to hand over to private operation; then it is necessary to build new 

service provision facilities that will be operated by the private sector. Such new facilities 

projects are commonly known by their contractual aspects of Build-Own-Operate (BOO), Build- 

Own-Operate-Transfer (BOOT) and their variants. Such arrangements require a transition from 

privatization to PPP because the relations between public and private sectors change from seller 

and buyer to long-term partners. 

In designing and implementing a PPP legal framework, the challenges are: 

‣ How can we implement the transition from privatization to PPP without taking away 

the privatization program’s ability to complete its mission; 

‣ How do we provide the legal basis for conducting privatization and PPP at the same 

time, until the privatization program completes its mission; 

‣ If the legal authority to conduct privatization and legal authority to conduct PPP are to 

exist simultaneously, until the privatization program completes its mission, how do 

we harmonize the two sets of laws and regulations; 



Final Report 

‣ In order to create a new legal mandate to conduct PPP activities, which option for 

legislative initiatives will enable the desired objective with the least possible 

disruption to the present legal framework; and 

‣ Which option for legislative initiatives can be achieved with the least amount of time 

and effort, without compromising quality and effectiveness? 

In order to apply an international best practice approach to evaluating the various Legal 

Framework options, we took the following approach: (1) identify all of the reasonably feasible 

options; (2) use a well-established options analysis methodology to reduce the number of 

options to three; and (c) perform a detailed analysis of the remaining options so as to arrive at a 

preferred option for the PPP Legal Framework. 

Basically, our options for designing and implementing a new legal framework for PPP fall into 

the following three categories: (1) enact no new PPP legislation; (2) enact a new PPP Act; and (3) 

do not enact a new PPP Act. In the cart below, we present summaries of the various options, 

along with brief arguments for and against the options, and then references to any international 

models that may be available. 

IV.A. Legal Framework Options Analysis 

Category 1: No New PPP Legislation (4 options) 

Option / Number Pros Cons International Models 

No legislation (1) 

Issue Standards and 

Guidelines instead of 

PPP regulations or Act. 

PPP is already 

underway in many 

sectors, and capacity 

of line ministries and 

local government to 

contract with the 

private sector is 

already in place, so 

no need to press for 

new legislation at the 

national level. Just 

issue an operations 

guideline manual for 

the national and 

regional PPP 

stakeholders to 

provide guidelines 

and standards. 

The PPP Unit does only 

dissemination of 

information, setting of 

standards/procedures 

and PPP standard or 

model documents for 

transactions, provides one 

stop access for private 

sector, and builds capacity 

in line ministries and local 

governments. PC staff 

selected by Gov’t and 

donor could move to the 

PPP Unit. 

No legislation (2) Legal framework 

could be in place 

Limits the MOF’s role 

to information 

dissemination, 

capacity building, 

guidance regarding 

how to apply the 

principles of 

affordability, risk 

allocation, and value 

for money. Authority 

for an investment 

decision has to be 

vested in separate 

MOF framework 

and/or separate legal 

body with mandate 

for viability gap 

funding. 

International 

experience in such 

India: Operation 

Guidelines Manuals for 

a National PPP Node & 

PPP Nodes. 

Malaysia: PPP Unit in 

the Min of Economic 

Planning, reports to 

Prime Minister. 

USA: Decentralized 

PPP at all levels of 

government. 

Sri Lanka: Bureau for 

Infrastructure 



Final Report 

Set up an investment 

fund structured like a 

boutique investment 

bank managed by 

government and using 

donor guarantees for loan 

and bond finance, and do 

PPP transactions. Move 

selected PC staff to MTIC 

or investment fund. 

already under the 

Investment Act and 

setup for institution 

already ready within 

the Malawi Trade 

and Investment 

Centre (MITC); good 

way to use donor 

guarantees. 

institutions has been 

mixed. Focus on deal 

flow rather than solid 

framework for PPP. 

Project finance is 

possibly best left to 

private investment 

banks. 

Investment. 

Bangladesh: 

Infrastructure 

Facility. 

Finance 

This mechanism seeks to 

bridge gap between 

private and public 

finance, using a PPP 

approach. 

BOT Law instead of PPP 

legislation (3) 

Fill BOT gap by passing a 

BOT law for new facilities 

while sector laws and the 

Privatisation Act enable 

existing facilities PPP. 

Concessions Law instead 

of PPP legislation (4) 

Until the Act is passed set 

up the national PPP Unit 

and program via Minister 

of Finance regulations per 

the PFMA. 

PPP for existing 

facilities 

is 

something already 

possible under the 

Privatisation Act, 

leaving only PPP for 

new facilities as the 

gap to be filled. 

Enables very quick 

start for PPP Unit 

and Program, and 

provides a new PPP 

Act to be passed at 

the appropriate time 

by legislature. 

Along with 

regulations, 

standards and 

guidelines can be 

issued to provide 

full guidance on how 

to do PPP. 

Passing a BOT Act 

would be just as hard 

as passing a 

comprehensive PPP 

Act and leaving PPP 

for the existing 

facilities to a sunset 

Act and sunset PC 

could be limiting. 

By not using the PC as 

the vehicle for startup, 

it could be more 

complicated to set up 

the new PPP Unit as 

new institutional and 

recruiting 

arrangements needed. 

The perceived need 

for a PPP Act may 

decline as PPP is 

conducted via 

regulations. 

Philippines BOT Law 

Hungary & multiple 

Eastern European 

countries. Often a 

condition of joining the 

European Union. 

Umbrella concession 

laws, with concession 

defined so it covers all 

forms of PPP. 



Final Report 

Category 2: Enact a new PPP Act (5 options) 

Option / Number Pros Cons International 

Models 

Enact a new PPP Act (1) 

PC conducts PPP on an ad 

hoc basis until Act passes. 

A formal PPP Unit is not 

created until Act passes. 

Interim PPP Unit within PC 

does PPP on basis of legal 

authority to do concessions. 


Until the PPP Act is passed, 

PC mandate is expanded by 

issuing a Ministerial 

regulation or Decree to 

include mandate for PPP for 

new facilities. 

The Privatisation Act can be 

used to do PPP for existing 

facilities, but new facilities 

cannot be properly treated as 

divestment, so mandate of PC 

would have to be expanded 

to do BOT deals. 


Implement a national PPP 

program in the PC for the 

long term. 

The PC is an established 

entity and could take on the 

PPP program without delay 

in mobilization. 

No need to enact any 

new legislation 

immediately. PC 

apparatus already in 

place to carry on PPP 

activity that is already 

commenced. The 

requisite deal flow for 

PPP Unit should be in 

place by the time PPP 

Act passes. A natural 

synergy between the 

skills need for PPP and 

the skills needed for 

divesting. 

It would be relatively 

quick and easy for the 

Minister to designate 

all forms of PPP as 

privatization modes, 

and issue related 

regulations. It might 

also be possible to do 

Ministerial Decree, but 

that would limit 

reliability in the minds 

of investors because 

decrees can change 

when a minister is 

changed whereas 

changes in laws require 

the approval of 

Parliament. 

The skills required for 

PPP are similar to the 

skills that are required 

for divestment. As 

privatization deal flow 

winds down PPP deal 

flow picks up, ensuring 

a steady deal flow to 

support steady 

resource requirements. 

Places the PPP 

program in a sunset 

organization that will 

soon be winding down 

its privatization 

program and naturally 

moving off the priority 

list of legislators. 

Possibility of tainting 

the image of PPP by 

placing it within a 

privatization entity. 

The PC has no 

mandate for PPP for 

new facilities. 

Although the 

Privatisation Act 

allows the Minister to 

designate any 

appropriate form of 

modality, and gives 

authority to issue 

regulation it would be 

inconsistent to add 

PPP for new facilities, 

as such is not 

divestment. Problem 

of doing national PPP 

program in a sunset 

organization. Possible 

taint of privatization 

on PPP. 

Possible difficulties in 

harmonizing the PPP 

Act & Privatization 

Act, and problems in 

having one entity 

operating under two 

separate laws. 

Possible taint of PPP 

by association with 

divestment, and lower 

political support for 

PPP as support for PC 

declines. 

None 

None 

None 



Final Report 


Privatization and PPP in one 

consolidated piece of 

legislation, or amend the 

Privatization Act to include 

PPP provisions, and expand 

the mandate of the PC to do 

both Privatization and PPP in 

the long term. 

Prepare PPP Act, but wait to 

see if or when needed, in 

interim use PPP regulations 

(5) 

Launch the PPP program by 

enacting regulations to PFMA 

and wait to see if a new PPP 

Act is needed. Selected PC 

staff to MOF. 

One consolidated new 

Act or amended Act 

including privatization 

and PPP will enable 

the expanded PC to 

conduct both 

Privatization and PPP. 

Two sources of deal 

flow to ensure enough 

activity to justify 

budget. Similarity of 

skill sets that are 

required to do each. 

Same advantages as 

above, while enabling 

flexibility regarding 

new legislation. PPP 

Unit would be set up 

immediately. 

Possible lack of 

government and donor 

support for such 

expanded PC mandate, 

and perceived 

prolongation of 

support 

for 

Privatization could 

impair achievability of 

this option. Possible 

taint of PPP with 

public resistance to 

privatization. 

Without commitment 

to a new PPP Act from 

the start complacency 

could set in and 


the new Act could be 

lacking if the new Act 

is needed. 

None 

None, but many of 

most successful P3 

programs were set 

up via regulations 

pertaining to how 

public funds are to 

be utilized. 

Category 3: Do not Enact a new PPP Act (5 options) 


Don’t enact PPP Act (1) 

Make adjustments to 

existing sector acts to 

harmonize approach to 

PPP guidelines and 

procedures. PC staff 

may be selected for 

transfer to line ministry 

and local gov’t PPP 

Nodes. 


Use procurement 

legislation already 

existing to provide 

legal basis for PPP. 

Selected PC staff to 

ODPP. 


Operate the PPP 

program within PC, 

Most sector laws, and the 

Local Government Act, 

allow contracting for 

goods and services with 

the private sector. 

Office of Director of 

Public Procurement 

(ODDP) has tender, bid 

and selection procedures, 

and has contract 

monitoring and 

compliance capacity. 

Most simple solution, and 

enables very quick start 

for the PPP program. No 

need for new institutional 

Possibility of missing 

an amendment or 

creating 

an 

inconsistency when 

putting in PPP 

provisions. Lots of 

legislative activity 

requiring lots of time 

and effort. 

Procurement is buying, 

and PPP is joint 

ventures, so in trying to 

put PPP into the 

procurement system 

there is no way to do 

risk sharing. 

Perpetuates any 

concerns that might 

presently exist 

regarding the PC and 

Maputo, Mozambique: 

PPP in municipal 

infrastructure. 

None 

Uganda: Utilities 

Reform Unit in Ministry 

of Finance. 

Jordan: MOF’s 



Final Report 

expanding the 

mandate of PC by 

issuing new PPP 

Regulations or a new 

PPP Decree. 

The PPP program 

could be quickly 

launched within an 

existing legal entity. 


Operate a new PPP 

program in MOF under 

regulations to be issued 

under PFMA. Selected 

PC staff to MOF. 


Issue a Presidential 

PPP Decree and 

regulations under the 

Decree for PPP 

Transfer selected PC 

staff to MOF. 

setup, synergies between 

deal flow and skill sets 

between PPP and 

privatization, time to 

improve Privatisation Act 

per 

PwC 

recommendations. 

Creates a fresh new start 

for PPP without baggage 

of PC and divestment. 

Principles of PPP 

(affordability, risk 

allocation, value for 

money) are all principles 

of public financial 

management. PPP 

program properly sits in 

the ministry responsible 

for and where decisions 

are made regarding 

public finance. 

Direct evidence of 

highest- level political 

support for PPP program. 

Relatively quick and easy 

to achieve in comparison 

with trying to pass a new 

Act. 

the privatization 

program. PPP program 

would not be seen as a 

fresh start and could by 

that perception be 

deprived of political 

support. 

Despite the success of 

this model in South 

Africa, the PFMA in 

Malawi might be less 

appropriate for such an 

approach. Local Gov’t 

Act might add 

complexity if it would 

require duplicate set of 

regulations, as was the 

case in South Africa 

thereby adding some 

complexity. 

A Decree does not 

require the same level 

of consensus building 

as an Act, so 

stakeholder buy-in 

could be less than 

adequate and the 

Decree might be 

ignored. Investor 

concerns that if the 

President changes, 

Decree will not 

continue in effect. 

Executive Privatization 

Commission. 

South Africa, U.K., 

Ireland, Australia: PPP 

Units in the Treasury 

operating under 

Treasury 

PPP 

Regulations. 

Indonesia: National 

PPP Unit operating 

under terms of 

Presidential Decree 67 

of 2005, with Standards 

and Guidelines 

prepared by the Unit 

for national & regional 

government bodies, and 

for the National Unit 

itself, for developing 

PPP projects. 

Although the charts above display all the feasible options, the points for and against each 

option are not covered by a comprehensive analysis. Such comprehensive analysis is provided 

in the sections below, in which we first define the evaluation factors, then we assign a weight to 

each of the factors, and then we use the weighted factor options analysis methodology to reduce 

the total number of options to the best three. 

The highest scoring three options, one from each category to ensure that we maintain coverage 

in all three categories rather than skewing results by narrowing down to only one or two 

categories, are then evaluated in detail to derive one preferred option. This option is then used 

to derive some recommendations regarding next steps that will be required in order to 

implement the preferred option. 



Final Report 

In the chart below, we have listed what we consider to be the most important evaluation 

criteria, and have assigned a weight to each in order to reflect its perceived relative level of 

importance when applying the factors to our options analysis. 

Evaluation Factors and Weighting 

# Evaluation Factor Explanation Weighting (0 - 10) 

1 Affordability to Government & Donors Are funds available 7 

2 Ease / Speed of Implementation Time and effort to achieve 6 

3 Utilization of Existing Resources Re-allocate existing or procure new 5 

4 Political Risk (low risk high score) Is there political will to support 4 

5 Value for Money Potential to create deal flow 3 

6 International Precedent Prior successful model 2 

7 International Trend Consistent with current trend 1 

Average Weighting (Total / 7) 5 

As the table above reflects, we have assigned the highest weight to the Affordability factor, for 

much the same reason we use it as the first test for PPP project appraisal. If there isn’t enough 

money to implement the option, what is the point of considering it? 

The second highest-weighted factor is time and/or ease of implementation. This factor received 

a relatively high weighting because we wanted to make sure the option we proposed was a 

practical one, rather than a theoretical one. 

The third highest-weighted factor is utilization of existing resources. The skill sets that are 

required to conduct PPP activity are similar to the skill sets required to conduct privatization 

activity, so when we consider the options for a PPP Legal Framework we must take care not to 

amend or create legislation that would impeded the ability of the PPP program to avail itself of 

the skills already well developed by privatization officers. This point is particularly important 

when there is a privatization body that has been in operation for several years and its officers 

have accumulated considerable experience in managing privatization transactions. The PPP 

Legal Framework must, therefore not be one that turns its back on the privatization program, its 

implementing body, and its experienced professionals in order to enable and mobilize PPP, but 

rather one that takes what is already available in terms of legal authority and builds upon that 

foundation to authorize and implement the new PPP program. 



Final Report 

The 4 th factor in our options analysis is Political Risk. For the purpose of this exercise, we define 

political risk as the reliability (or lack thereof) of political support for the option being 

examined. In the case of Malawi, this was an important factor in scoring options that involved a 

longer-term role for the Privatisation Commission in the PPP program. While such options 

scored highly in the Use of Existing Resources factor (the professional resources in the PC are 

considered to be quite good) the options did not fare well in the Political Risk test because: (a) 

donor support for the PC is expected to end at the end of 2007; and (b) although the PC has 

privatization revenues sufficient to continue in operation for as much as 1-3 years beyond 

12/31/07 and has identified some transactions it considers important to complete before 

ceasing operations, the political support for continued PC operations appears to be relatively 

uncertain. 

It is a long-standing policy of IP3 not to involve itself in political disputes that might 

compromise the independence of our analysis and recommendations. Accordingly, we did 

not allow the political battle over the future of the PC to influence our analysis. We waited for 

an indication that both donor and Government had taken a decision as regards such continued 

support (or lack thereof), and until such a decision became apparent we continued to consider a 

longer-term role for the PC in the PPP program. In fact, we prepared a version of this report 

that was distributed internally for discussion. The report envisioned a PC with a mandate 

expanded to include PPP along with Privatization, passage of a new law (or amendment of an 

existing law) covering both PPP and Privatization, and the PPP Unit being located within the 

expanded PC on a long-term basis. We also prepared this version of the report and distributed 

it for discussion purposes. We waited for a decision by donor and Government, regarding the 

future role of the PC in the PPP program, before we released this final report. 

The decision became apparent in a Retreat of decision makers that was held at the end of March 

2007. Based on the session notes subsequently circulated by the Facilitator of the event, we 

concluded that both donor and Government had taken the decision not to involve the PC in the 

PPP program on a longer-term basis. There does appear, however, to be support from both 

donor and Government to involve the PC in the PPP program on an interim basis, and we have 

prepared this report accordingly. 

If political support for a longer-term role for the PC were to increase, and there is some 

possibility of that happening after PwC presents its final report to Cabinet, then the total scores 

of longer-term PC participation options would improve. In particular, an increase of such 

options’ Political Risk score from the present level of 1 (indicating high political risk) were to 

increase to a neutral score of 5, then at least one of the longer-term PC participation in PPP 

options would rise to the top 5 in rank. If the score for Political Risk were to become positive, 

maybe 6 but certainly if 7, then at least one of the longer-term PC participation in PPP options 

would attain a ranking among the top 3 and would therefore require detailed analysis and 

consideration thereof. 

The 5 th factor used in our multi-criteria weighted options analysis, which is international best 

practice for policy and legal options analysis, is Value for Money. Once the option passes the 

Affordability test, then the most important aspect of deciding whether or not government 

should make the investment is the relative amount of service provision that will be made 

available by the investment. The concept is similar to the private sector’s Return on Investment, 



Final Report 

but in the case of government the focus is more on how much service delivery will be made 

available than on what financial return can be achieved. 

The last two factors address the issue of whether there are international experiences that show 

the option being considered has been tried and it was successful, and whether the option being 

considered, while perhaps not yet tested in the international market, might be part of a 

recognized international trend for PPP. 

In the charts below, we present the results of the multi-criteria options analysis: 

Multi-Criteria Analysis Scoring Matrix 

Enact No PPP Legislation (4 Options) 

Option 1 1 1 2 2 2 3 3 3 4 4 4 

Factor Score Weight Rank Score Weight Rank Score Weight Rank Score Weight Rank 

1 9 7 63 3 7 21 8 7 56 8 7 56 

2 9 6 54 3 6 18 4 6 24 4 6 24 

3 8 5 40 2 5 10 5 5 25 7 5 35 

4 8 4 36 5 4 20 5 4 20 5 4 20 

5 5 3 15 5 3 15 5 3 15 5 3 15 

6 7 2 14 7 2 14 3 2 6 7 2 14 

7 5 1 5 3 1 3 2 1 2 5 1 5 

Total 227 101 148 169 

The results above indicate that Option 1 is significantly more attractive than the other options. 

A detailed discussion of Option 1 is presented later in this section. 

Enact a New PPP Act (5 Options) 

Option 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 

Factor Score Weight Rank Score Weight Rank Score Weight Rank Score Weight Rank Score Weight Rank 

1 4 7 28 3 7 21 2 7 14 2 7 14 5 7 35 

2 4 6 24 3 6 18 2 6 12 2 6 12 5 6 30 

3 8 5 40 8 5 40 9 5 45 9 5 45 7 5 35 

4 4 4 16 3 4 12 2 4 8 2 4 8 8 4 32 

5 3 3 9 4 3 12 3 3 9 2 3 6 7 3 21 

6 1 2 2 1 2 2 1 2 2 1 2 2 1 2 2 

7 5 1 5 5 1 5 5 1 5 5 1 5 9 1 9 

Total 124 110 95 92 164 



Final Report 

The results above indicate that Option 5 is significantly more attractive than the other options. 

A detailed discussion of Option 5 is presented later in this section. In reading these options 

analysis results, one should keep in mind that a PPP Act might be needed as a mechanism for 

showing the populace that Government is serious about PPP. Such an Act might not be 

necessary for technical reasons relating to the legal framework, e.g. to fill gaps in the existing 

framework or to enable activities not yet clearly authorized, but might be necessary as a 

mechanism for giving weight to the PPP Policy initiative. This issue will be explored further 

when we provide a detailed analysis of the three top ranked options, later in this section. 

Do Not Enact a New PPP Act (5 Options) 

Option 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 

Factor Score Weight Rank Score Weight Rank Score Weight Rank Score Weight Rank Score Weight Rank 

1 8 7 56 8 7 56 3 7 21 5 7 35 5 7 35 

2 3 6 18 6 6 36 8 6 48 8 6 48 6 6 36 

3 6 5 30 6 5 30 7 5 35 2 5 10 2 5 10 

4 7 4 28 6 4 24 1 4 4 8 4 32 5 4 20 

5 3 3 9 1 3 3 3 3 9 7 3 21 6 3 18 

6 7 2 14 1 2 2 7 2 14 8 2 16 6 2 12 

7 5 1 5 1 1 1 6 1 6 7 1 7 5 1 5 

Total 160 152 137 169 136 

The results above indicate that Option 4 is the preferred option. There is some concern that the 

score for Options 1 and 4 are relatively close, and that means the reader should carefully 

examine the individual components of those scores to ensure that there has not been any 

distortion in the analysis. In considering this matter, we applied a subjective analysis that 

supported the technical options analysis result, as follows: there has been a continuing theme on 

the part of donor and Government that some kind of a clear signal needs to be sent that PPP is 

an important policy objective. In addition, the economy of Malawi has a long history of 

government control, and that makes it more difficult for a new PPP orientation to take hold 

unless there is a clear policy and legal “push” for the new PPP program. Without at least 

pushing forward the new PPP Policy by enacting new PPP regulations (the scenario under 

Option 4) and just leaving the market to pursue PPP by simply removing present impediments 

to it in the legal framework (the scenario under Option 1), we believe the PPP program would 

stall. On this basis, our subjective evaluation supported the selection of Option 4 per the 

options analysis results above. 

Detailed Analysis of Best Three Options 



Final Report 

In Category I, the highest-scoring option was the one below: 


No legislation (1) 

Issue Standards and 

Guidelines instead of 

PPP regulations or Act. 

The PPP Unit does only 

dissemination of 

information, setting of 

standards/procedures 

and PPP standard or 

model documents for 

transactions, provides one 

stop access for private 

sector, and builds capacity 

in line ministries and local 

governments. PC staff 

selected by Gov’t and 

donor could move to the 

PPP Unit. 

PPP is already 

underway in many 

sectors, and capacity 

of line ministries and 

local government to 

contract with the 

private sector is 

already in place, so 

no need to press for 

new legislation at the 

national level. Just 

issue an operations 

guideline manual for 

the national and 

regional PPP 

stakeholders to 

provide guidelines 

and standards. 

Limits the MOF’s role 

to information 

dissemination, 

capacity building, 

guidance regarding 

how to apply the 

principles of 

affordability, risk 

allocation, and value 

for money. Authority 

for an investment 

decision has to be 

vested in separate 

MOF framework 

and/or separate legal 

body with mandate 

for viability gap 

funding. 

India: Ministry of 

Finance sets Operation 

Guidelines Manuals for 

a National PPP Node & 

PPP Nodes. 

Malaysia: PPP Unit in 

the Min of Economic 

Planning, reports to 

Prime Minister. 

USA: Long-standing 

decentralized PPP at all 

levels of government. 

The attractive feature of this option is that there is no need to enact any legislation at all, no 

laws, no regulations, and no decrees. The PPP Unit is established in the Ministry of Finance, 

because that is where decisions such as Affordability, Risk Allocation, and Value for Money are 

made at the national level. It prepares and distributes information on the PPP program and 

how to do PPP projects. It provides capacity building for the various spheres of government 

involved with PPP project identification, assessment, structuring, and contracting. This kind of 

PPP Unit is a coordinating body, not a decision making body. A Unit of this sort is 

appropriate for a country in which either: (a) the political culture will not accept what they 

would perceive as just another layer of bureaucracy, and would resist any attempt by the Unit 

to impose any decision-making authority over projects being developed by other government 

agencies; or (b) the business orientation of the economy is so well developed that PPP has 

already become routine, government and business are already accustomed to doing joint 

ventures with one another, and a wide variety of generally accepted PPP practices has evolved, 

with which stakeholders in the PPP process are already comfortable and need no further 

guidance, regulation, or motivation. 

In the case of India, the political culture was not expected to be tolerant of a PPP Unit that 

exercised decision-making authority over line ministries and local government units developing 

PPP projects. There is also a vibrant economy, with a multitude of business activities involving 

joint working with government bodies already having been in place for many years. The legal 

environment presents little challenges to PPP activity. Maybe one of the more important factors 

was the GOI’s decision to place decision-making for government investment into a different 

body than the PPP Unit. They term investing of the type normally involved in a PPP 



Final Report 

transaction to be “viability gap funding” and those decisions are made directly by Treasury, a 

variety of targeted managed funds, and the new India Infrastructure Finance Corporation 

(IIFC). There are also well-established private sector financial organizations similar in design to 

the IIFC, such as Infrastructure Leasing and Finance Company (IL&FC) that make the same 

kinds of decisions a PPP Unit would make (affordability, etc.) but for market reasons not policy 

reasons. 

In Malaysia, we find again a very active and entrepreneurial economy with a highly developed 

private sector (very different from Malawi, where the private sector is still in development stage 

and the economy has been traditionally dominated by Government) and business has been joint 

venturing with all levels of government for many years. Although the PPP Centre is technically 

housed in the Ministry of Economic Planning, it is evolving into a transaction-support unit 

staffed with professionals who could easily qualify for positions in private investment banks. 

Most of the technical work, however, is done by consultants so the Unit itself does not have a 

heavy payroll burden. Political support for the Centre and the PPP Program comes from the 

Prima Minister, who at the end of 2006 began compiling a list of hundreds of officially endorsed 

PPP projects that would be coordinated by the PPP Centre but largely implemented by 

consultants. 

In the United States, business and government have become so inter-twined that some assert 

the President is more of a corporate executive than a head of state. Nearly all of the municipal 

airports are run under PPP arrangements with municipal governments. Toll roads dominate 

the major routes in many parts of the country, operated by private companies pursuant to 

concession contracts. One of the more successful PPP operations in the world is managed by 

the Ports Authority of New York and New Jersey, which is so private-sector oriented they 

manage billions of dollars of assets with only a few dozen management –level employees, 

because virtually everything is contracted to the private sector. The legal framework is 

completely developed in the key areas of Procurement, Contracts, Uniform Commercial Code, 

Civil Procedure, and Corporation Law, so there are no gaps that a national PPP program would 

need to fill. Even Government itself is taking e-Gov initiatives designed to make government 

efficient and responsive like the private sector, so there is no need to reform government to 

make it a better PPP partner. 

At this juncture, the reader may be thinking “none of this sounds at all like Malawi” and indeed 

that is our point regarding this option. The option scores well because it can be implemented 

quickly and easily, and indeed a good amount of PPP activity is already underway in Malawi, 

so standards and guidelines could have an immediate beneficial impact. But this option fails 

when compared to the highest-scoring options within the other two categories, discussed 

below, because Malawi needs a clear mandate from the top, with associated strong policy and 

legal support, to overcome the long tradition of government intervention in the economy and 

move into joint ventures with the private sector. For this reason, we now eliminate this option 

from further consideration. 

In Category II, the highest-scoring option was the one below: 



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Option / Number Pros Cons International 

Models 

Prepare PPP Act, but wait 

to see if or when needed, 

in interim use PPP 

regulations (5) 

Launch the new PPP 

program by enacting 

regulations to PFMA and 

wait to see if a new PPP 

Act is needed. Selected PC 

staff to MOF. 

Same advantages as 

above, while enabling 

flexibility regarding 

new legislation. PPP 

Unit would be set up 

immediately. 

Without commitment 

to a new PPP Act from 

the start complacency 

could set in and 


the new Act could be 

lacking if the new Act 

is needed. 

None, but many of 

most successful P3 

programs were set 

up via regulations 

pertaining to how 

public funds are to 

be utilized. 

The most attractive feature of this option is its flexibility, which is certainly needed in a country 

such as Malawi where the political orientation tends to be quite fluid. In order to officially 

launch the PPP Program and Unit, the Minister responsible for Finance may issue PPP 

regulations under the Public Financial Management Act (PFMA). The Act is an appropriate 

place to issue PPP Regulations because the provisions of the Act pertain to the responsible use 

of public funds. The PPP tests of Affordability, Risk Allocation, and Value for Money are all 

cornerstones of any treasury function, in both the public sector and in the private sector. So the 

project appraisal tools of a PPP Unit fit neatly in the fiscal responsibility purposes of the PFMA. 

If in the future the Government sees a need to pass a new PPP Act, perhaps to show 

Government is serious about the program, or that Government is taking control over what had 

been ad hoc, uncoordinated national PPP activity, or perhaps to provide a new umbrella for the 

PPP process, then it has the PPP Act we have prepared and can elect to pass that draft Act. This 

flexibility feature is considered very important in Malawi. 

The institutional relationships for a PPP program are also set up by the PFMA; at least the basic 

components are in the Act, which designates the Ministry of Finance as the legal venue for 

making treasury decisions, and links between the MoF and the various other government 

bodies are established by the designation of Accounting Officers. The Act provides that 

Accounting Officers are the persons responsible for ensuring that all public funds expended by 

their government body are used in a efficient and effective manner, as well as properly 

recorded. The new PPP Regulations could simply state that for an Accounting Officer to 

demonstrate efficient and effective management of public funds, he or she must undertake a 

PPP viability analysis. In the draft PPP Policy that we prepared for this engagement, we 

included a provision that any government body that wants to expend public funds must 

demonstrate that PPP was evaluated as an option for leveraging public funds with private 

investment. 

Although there is not yet an international example of a successful PPP program that was 

mobilized with regulations while a draft PPP Act waited for government to pass it at the 

appropriate time, there are several very successful international examples of regulations being 

used for mobilizing PPP programs. Prominent examples are South Africa, Ireland, the U.K., 

and Australia. In those countries, however, the business climate was such that PPP readily took 



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hold as a natural course of events. In Malawi, if the PPP program does not readily take hold, 

we will need a PPP Act ready to pass to get everyone focused on the benefits of PPP and 

Government’s commitment to support it. 

In Category III, the highest-scoring option was the one below: 



Operate a new PPP 

program in MOF under 

regulations to be issued 

under PFMA. Selected 

PC staff to MOF. 

Creates a fresh new start 

for PPP without baggage 

of PC and divestment. 

Principles of PPP 

(affordability, risk 

allocation, value for 

money) are all principles 

of public financial 

management. PPP 

program properly sits in 

the ministry responsible 

for and where decisions 

are made regarding 

public finance. 

Despite the success of 

this model in South 

Africa, the PFMA in 

Malawi might be less 

appropriate for such an 

approach. Local Gov’t 

Act might add 

complexity if it would 

require duplicate set of 

regulations, as was the 

case in South Africa 

thereby adding some 

complexity. 

South Africa, U.K., 

Ireland, Australia: PPP 

Units in the Treasury 

operating under 

Treasury 

PPP 

Regulations. 

The most attractive feature of this option is we already know that regulations could be issued 

under the Public Finance Management Act, as described in our analysis of the preceding option 

above, but in this option we drafting a PPP Act and then figuring out when (or if) it should be 

passed. Although this option has enjoyed success in several countries, those countries have 

market systems that are more easily adapted to having joint ventures between government and 

private operators than the system in Malawi. 

Because of the potential need for a national PPP Act in Malawi, to give a clear signal to 

stakeholders that Government is serious about its commitment to PPP, we cannot advise 

adopting this option because it does not allow for the possible need for such an Act to be passed 

in the future, if the market response to PPP Regulations is less than hoped. 

Description of Selected Option and Way Forward 

Based on a comparative analysis of the three best-scoring options, presented above, we consider 

Category II option 5 to be the best choice for Malawi’s PPP Legal Framework. To summarize 

the essential components of the preferred option: 

‣ Mobilize the national PPP program by issuing PPP Regulations under the Public 

Financial Management Act and prepare a draft PPP Act for Government to pass at the 

appropriate time, if and when such an Act is deemed necessary; 



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‣ While the Regulations are being prepared and passed, their related Operations 

Guidelines and Standard Documents & Procedures are prepared, institutional 

arrangements are readied, and support from Government and Donor are put into place, 

the PPP program will operate within the Privatisation Commission; 

‣ The legal basis for the PC to conduct PPP transactions will be provisions of the Public 

Enterprises (Privatisation) Act that allow for the use of concessions as one of the 

approved methods of privatization; and 

‣ A core team of 4-5 professionals will be identified in the PC as the ones who will be 

responsible for conducting the PPP Program, and they will transfer to the PPP Unit 

when it is set up in the Ministry of Finance in approximately 12 months. 

The process of constructing a PPP Legal Framework around this option would involve the 

preparation of a Draft PPP Act, which is provided in the Appendices to this report, and a set of 

PPP Regulations, which are also provided as an Appendix to this report. It is important to note 

that the draft Act is based upon a U.N. model that has been edited to adapt it to the Malawian 

legal system, so the draft should not be viewed as a form of turn-key document that can be 

presented to Parliament. If Government wants to enact such an Act, we will be pleased to 

communicate with the relevant officials and fine tune the document as needed. The PPP 

Regulations we have provided are also based on an international model, i.e. South Africa. IP3 

was involved in the drafting of the South African PPP Regulations, so we feel comfortable in 

presenting them in this report. 

Our approach to designing a PPP Framework has been based on the following: Policy creates 

Law, and then Law creates Institutions. Accordingly, the next section presents the Institutional 

Framework design required by the Policy and Legal Frameworks that have been established in 

this section, and in the preceding section on Policy. 



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V. INSTITUTIONAL FRAMEWORK 

The Government’s institutional framework for PPP, and the institutional setup for its national 

PPP Unit, must include provision of standardized procurement and contracting documents, 

PPP best practices, standard procedures, and guideline tools to identify, structure, evaluate, 

award, and monitor PPP projects. Development of these Standards and Guidelines should be 

done during the interim phase of the PPP program, while the program is operated within the 

Privatisation Commission, and before PPP regulations are passed and the permanent Unit is 

established under the Ministry of Finance. 

V.A. 

Phases of PPP Institutional Setup 

Phase I: Mobilize the national PPP program as follows: 

1. Assign selected PC personnel to conduct PPP activities; 

2. Conduct preparation and dissemination of PPP Standards and Guidelines; 

3. Draft PPP Regulations to be issued under Public Finance Management Act; 

4. Establish a PPP website to disseminate information about the PPP program, provide 

details regarding PPP project opportunities for investors, disseminate information and 

status reports of PPP procurement activities, and provide easy and quick access to PC 

personnel tasked with conducting PPP activities; 

5. Conduct capacity building programs, in the Ministry of Finance for assessment of risks 

associated with contingent liabilities in PPP contracts, in the stakeholder government 

agencies to develop skills that will eventually become centers of knowledge known as 

PPP Nodes, and in the Privatisation Commission for staff who have been tasked with 

undertaking PPP activities; and 

6. Design, conduct fundraising activities, and establish the institutional setup for a Project 

Development Facility to fund technical support for PPP transactions. 

The approach inherent with this Interim Stage design is to keep salaries and overhead as low as 

possible while PPP deal flow can be created. At the same time, the Interim Stage affords time to 

set up the essential components of a PPP Institutional Framework, and to set up a mature stage 

PPP Unit, both of which cannot be complete until: (a) the new PPP Regulations are passed; (b) 

Government and donor funding is budgeted and formally put into place for the PPP Unit and 

the PPP Program; (c) sufficient capacity has been built within the Ministry of Finance for 

contingent liability risk assessment, in the PC for staff assigned to the PPP Program, and in 

stakeholder government agencies for project identification, assessment, structuring, contracting, 

and contract management; and (d) the Project Development Facility has been formally 

established, and funded. 

There is a lot of work in this initial stage, and completing the tasks will take a minimum of 6 

months and a maximum of 12 months to 18 or even 24 months, depending on how quickly 

Government and donors can get the PPP Regulations passed and take all of the necessary 

decisions regarding institutional setup and funding. Although donor funding for the 

Privatisation Commission is expected to end on 12/31/07 we have been advised by the PC’s 



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management that they intend to continue PC operations, with funding from privatization 

revenues, for most of 2008 and perhaps into 2009. This means the PC will continue to serve as a 

platform for the PPP Program until all of the key elements of the long-term PPP Program and 

PPP Unit can be put into place. 

Phase II: Set up a small, scalable PPP Unit reporting to Ministry of Finance 

When all of the necessary institutional, legislative, procedural, and financial elements have been 

put into place by the end of Stage I, the PC staff who were tasked with PPP activities will be 

transferred into a new PPP Unit under the Ministry of Finance. Their counterparts in 

stakeholder government organizations will be the Accounting Officers, as designed in the 

Public Finance Management Act. The Accounting Officers will be the designated persons 

responsible for proposing PPP projects to the PPP Unit, and it will be under the Act’s provisions 

that Accounting Officers must utilize public funds in an efficient and effective manner that PPP 

Unit personnel will require PPP projects that are proposed by the Accounting Officers to pass 

the tests of (a) Affordability; (b) Allocation of Risks; and (c) Value for Money. 

The private sector may also propose new PPP projects, using unsolicited proposals. In PPP it is 

important to encourage private sector innovation. However, there will be strict controls over 

such proposals. First, they must go through the standard channel starting with the relevant 

agency’s Accounting Officer and then through the PPP Unit’s three-stage approval process. 

During Phase I of the PPP Program, consultants will prepare detailed standards and guidelines 

on how to handle unsolicited proposals. They will include international best practice 

methodologies such as Dutch Auction, Swiss Lottery, automatic short-listing, extra points for 

innovation in technical proposals, and recovery of research and development cost (audited 

figures) incurred in preparing the unsolicited proposal through credits made available in their 

financial proposals. 

While stakeholder agencies and interested private parties propose new PPP projects, and the 

projects are processed, the Phase II PPP Unit will grow gradually in response to the increased 

deal flow. When the deal flow reaches the level necessary to justify the expenses associated 

with the Phase III PPP Unit, what we have described in detail below as the “mature” Unit, such 

a Unit will be developed and commence full-scale operations. 

PPP Unit Phased Development 

Privatisation 

Commission 

Pre-legislative 

Phase I 

PPP Unit 

Start–up 

Post legislative 

Phase II 

PPP Unit 

Mature 

Phase III 



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As long as the mature stage PPP Unit is not engaged in privatization, there is no need to create a 

formal departmentalization structure to segregate activities of the PPP Unit. If a decision were 

to be made to have the PPP Unit engage in privatization activities, then it would be best to 

create formal, separate departments or divisions to distinguish between PPP and privatization 

in the minds of stakeholders. This will help PPP activities to be conducted without people 

assuming the Unit’s personnel are trying to divest of government assets, when what they are 

really doing with PPP is forming joint ventures to create new assets. 

The mature stage (Phase III) PPP Unit structure assumes that the privatization program will 

gradually wind down and conclude its mission from within a structure other than the PPP Unit. 

Accordingly, the functional divisions illustrated by boxes in the organization charts should not 

be interpreted to mean formal departments or divisions are necessary. The boxes reflect the 

functional areas, and in practice many personnel will have responsibilities that overlap one or 

more of the functional areas portrayed by the boxes. We recommend a matrix management 

style for managing the Unit and its personnel, to accommodate this flexible and scalable design. 

In Phase I, the PPP Program will be implemented by selected PC personnel, and the activities 

required to move to Stage II are conducted by consultants. This approach is designed to keep 

fixed costs to a minimum. The assumption is that while the privatization program winds down, 

fewer PC personnel will be required to conduct privatization activities. Rather than gradually 

laying off PC personnel as privatization deal flow subsides, we provide selected PC personnel 

with the opportunity to transition to PPP, and eventually become full-time staff members of the 

PPP Unit when it is moved under the MoF in Phase II. 

In the section below, we present a profile of the human resources that will be needed at the time 

the PPP Program is ready to graduate to Stage II: setting up a small, scalable PPP Unit reporting 

to the Ministry of Finance. 

Key Positions for Phase II PPP Unit 

(PPP Regulations have been passed and Standards & Procedures are in place) 

1. Director General / CEO 

Overall Co-ordination; this will be a working hands-on role with specific responsibility for high 

profile PPP projects. Also serves as spokesperson for the PPP Program. Reports directly to the 

Minister of Finance and is accountable to PPP Unit board of directors. 

2. Assistant to DG/CEO and Office Manager 

Provides administrative support to the DG/CEO and manages human resources. 

3. Information and Education Officer 

Very important position: responsible for information dissemination, media relations, public 

relations, and investor relations. Manages the PPP Program website, responds to inquiries 

received via the website and from other sources. 

4. Transaction Specialist(s) 



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One Transaction Specialist capable of handling multiple sectors. Sector specialists and 

transaction-specific specialists will be recruited as the need arises, with contracts based on 

duration of transaction. This can expanded out to many roles as required according to each or 

multi-project assignments. Must be familiar with PPP project life cycles. 

5. Economic / Financial Analyst 

This is a key position that will require not only the usual abilities to assess economic and 

financial viability of proposed PPP projects, but also PPP-specific technical skills needed for 

calculating Value for Money using Public Sector Comparators, and knowledge of the 

Government budget system necessary to assess Affordability. Must also have technical skill in 

contingent liability risk assessment, so he/she can advise the risk management group at MoF 

regarding risk exposures in PPP contracts. 

6. Contract Specialist 

Commercial contact specialist who has the skills to evaluate draft PPP contracts, direct 

experience in dealing with concession agreements, and PPP-specific skills needed for risk 

allocation in PPP contracts. Does not have to be an attorney, but should have at least some 

formal training in contract law. 

7. Procurement Specialist 

Must have strong familiarity with Government and donor procurement regulations and 

procedures. Responsible for PPP project compliance with those regulations/procedures. Until 

the PPP Unit has enough deal flow to justify the expense of hiring a new Contracts Monitoring 

& Compliance specialist, the Procurement Officer will perform those tasks. 

8. Accountant 

Makes daily bookkeeping entries, posts to General Ledger and prepared monthly and quarterly 

financial statements, performs annual compilations and financial statements, prepares monthly 

financial reports for management. Does not have to be a chartered accountant but should have 

at least several years of bookkeeping experience. 

9. International Advisor(s) 

If donor funds are available for a resident advisor recruited from international experts, we 

recommend that such a person be recruited. One advisor could be engaged on a 1-year contract 

with possibility of renewal, for this Stage II of the PPP Unit’s evolution. In Stage III it would be 

advisable to hire an additional resident advisor, if funds are available. In addition to providing 

technical expertise, the advisors will be tasked with transferring their skills to local counterparts 

so that at the end of the advisors’ contracts local professionals can carry on the work. 

V.B. 

Segregation of Duties and Prevention of Conflicts of Interest 

In defining duties, responsibilities, and reporting relationships for personnel described above, 

and in defining the internal reporting relationships for the PPP Unit itself, it is essential to 

ensure that the design allows for the prevention of conflicts of interest. 

The principles to be applied for prevention of conflicts of interest are: 



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The people who are responsible for development of projects cannot be the same people 

who are responsible for assessment of those projects; 

The people who are responsible for assessment of projects cannot be the same people 

who formally issue approvals for those projects; 

Similar to the point above, but focused on internal financial control: the people who 

approve expenses cannot be the same people who pay the expenses; 

The people who approve PDF funding cannot be the same people who expend the 

PDF’s funds, for reasons similar to the accounting point above; 

 

The Unit must have financial independence, so that its decisions regarding project 

approvals are not influenced by financial dependence; and 

The Unit must be independent of the industries in which the PPP transactions take 

place, i.e. it must avoid industry capture. 

The concepts above are not new, nor are they unique to PPP Units. But it is not unusual to miss 

these points when designing a PPP Unit because the design’s focus is on outputs. We have 

prepared this section to underscore the importance of avoiding any conflicts of interest inside of 

the PPP Unit. Independence from political, financial, and industry capture are as important for 

a PPP Unit as they are for a regulatory agency. 

Segregation of Duties 

So we apply the well-established accounting principle of Segregation of Duties. If the functions 

of developing projects are segregated from the functions of approving projects then it will be 

necessary for two or more persons to collude in order to defraud. With no segregation of 

duties, no collusion is necessary and the temptation/risk is higher that a fraudulent event will 

occur. Similarly, the function of approving a project must be separated from the process of 

formally conveying that decision to external parties, for much the same reason that a person 

who approves an invoice should not be the same person who writes the check. 

PPP infrastructure projects often involve the investment of very large sums of money. It is 

inevitable that some PPP Unit personnel will be approached by interested parties in efforts to 

influence the Unit staff member’s decisions. If there is segregation of duties, such attempts to 

influence will fail unless there is collusion within the Unit. So while we are recommending 

matrix management for the Unit, that should in no way be construed to imply that the functions 

of each member of the Unit’s staff will be allowed to have any decision-making authorities that 

overlap the duty areas that must be segregated. 

Segregation of PPP Unit and Project Development Facility 

Turning now to the Project Development Facility, the person who approves a project for PDF 

funding cannot be the same person who actually disperses the PDF funds. For this and other 

reasons described below, we recommend that the PDF be separate from the PPP Unit. In that 

design, the DG/CEO of the PPP Unit does not approve PDF funding; rather he or she requests 

the funding. Then the Head of the PDF (who is accountable to a committee) makes the decision 

whether or not to provide PDF funds. Continuing on the theme of segregation of duties the 

Head of the PDF will not be authorized to actually disburse funds. It will be an accountant on 

staff of the PDF who will “write the checks.” 



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Separating Financial Approval from Financial Disbursement 

The segregation of duties afforded by the above-described design also apply to the cash 

disbursements within the PPP Unit, as well as to the investments made by Government based 

on recommendations from the DG/CEO of the PPP Unit. For PPP Unit internal expenses, the 

Accountant writes the checks, not the DG/CEO and although DG/CEO of the PPP Unit 

formally conveys PPP Unit approval for Government’s investment of the funds it will require 

for its part of the PPP project, it is not the DG/CEO but rather the national Treasury that will 

“write the check.” 

Other reasons why the PDF must be independent of the PPP Unit are: (a) the funds in the PDF 

are contributed by Government and Donors with agreements that are usually very different 

from those associated with funding of the PPP Unit; (b) there may be, and usually there are, 

funds contributed to a PDF by donors who did not contribute to the PPP Unit; (c) the functions 

of a PDF are very different from those of a PPP Unit, in that a PDF is structured and operated 

much like an investment trust, whereas a PPP Unit is structured and operated as a technical 

facility focused on deal flow outputs; and (e) the PDF has its own internal risk management 

profile and responsibility, quite separate and distinct from those of the PPP Unit. 

Separation of Project Development and Project Assessment 

Within the PPP Unit, it is essential to segregate the roles of Project Development and Project 

Assessment. Similarly, because the PPP Unit is tasked with Project Assessment, while the PDF 

is tasked with Project Development, their functions must be segregated and approval from one 

cannot be binding on the other. This provides an important system of checks and balances. 

To expand upon the last point above, a PDF has a fixed sum of money with which to operate 

over a period of time. The money is a revolving fund to the extent that winning bidder are 

required to reimburse the PDF for funds it expended on technical assistance. A high-risk 

project may offer potentially high rewards in terms of Value for Money and improved service 

delivery, but the relatively high risk of not reaching financial closure exposes the PDF to the risk 

that there will not be a winning bidder who will reimburse the PDF at financial close. Lower 

risk projects involve less risk of non-reimbursement, but offer lower potential benefits. So PDF 

managements and its supervisory board, who have a fiduciary responsibility for the funds 

provided, must manage their portfolio of funded projects based on their internal risk profile 

and risk management plan. All of this is completely independent of the internal management 

dynamics of the PPP Unit. 

So the DG/CEO cannot approve a project for PDF funding. He or she may approve the project 

in accordance with the PPP Unit’s project evaluation criteria, but he/she can only request (not 

approve) funds from the PDF. In summary, the points above describe the internal control 

systems that will prevent conflicts of interest within the PPP Unit, and we have take the extra 

step of segregating the PDF from the PPP Unit so as to provide the necessary segregation of 

duties between approval and disbursement. 

Potential conflicts of interest must also be avoided by enduring that financial factors do not 

unduly influence decisions of the PPP Unit and the PDF. When funds are provided, the 



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agreements relating to such provision of funds must be carefully examined to ensure that there 

are no “strings attached” that might cause the Unit or PDF to take decisions based on factors 

other than the technical factors with which they have been tasked. 

Independence from Political and Industry Capture 

Sources of funding for the PPP Unit, and regulations on what kinds of funds may be accepted under what 

conditions, are described in detail in the Sources of Funds section of the Draft PPP Act and Regulations 

provided in the Annex to this report. 

A final point regarding conflicts of interest is that the PPP Unit, and obviously the PDF, must be 

insulated as much as possible from political influence. This means great care will need to be 

taken in defining how officers are appointed and removed. Both should be based clearly on 

merit, there must be competition in the selection process, and there must be clearly defined 

grounds required for removal. 

V.C. 

Organizational Structure of the PPP Unit 

Before the internal organizational 

structure for the PPP Unit is considered, 

the actions described in the figure to the 

right must first be carried out. The 

options open to the PPP Unit in terms of 

its location and to whom it will report 

within the existing Government 

structures are examined in another 

Designing a PPP Unit’s Organizational Structure 

1. Define the proposed levels of authority and responsibility; 

2. Develop a terms of reference staffing profile; 

3. Identify a human resource profile for the staff positions; 

4. Establish recruitment requirements; 

5. Develop terms of employment and pay structures; 

6. Finalize training requirements of staff; and 

7. Establish a budget for the PPP Unit. 

section of this report. These options will be better understood by reviewing the PPP Unit 

design within the current institutional context, taking into account the international models that 

have been successful. 

V.D. 

PPP Unit Structure and Activities 

In Malawi various GoM agencies are involved in PPP, yet the guiding expertise on PPP is 

dispersed, leaving quality control and coordination without oversight. In most countries that 

have successfully implemented PPP there is a PPP Unit or “focal point” to ensure that line 

agencies and local governments pursuing PPP projects adhere to best practices and standards, 

especially in the assessment of affordability, value for money, and the appropriate allocation of 

risks between the public and private sector. These quality control and coordination functions 

should rest with a central PPP body. Therefore, in this report we have recommended the 

establishing of a National PPP Unit. 

Before considering the institutional options, it is essential to define the function and form of the 

PPP Unit itself. A typical PPP Unit in a country of Malawi’s size should be lean and nimble, but 

should also have the capacity to cover a range of functions and grow in scale as the program 

progresses. The PPP Unit should have core technical and management staff and utilize, to the 

greatest extent possible, local skills to keep costs down and increase the skills mix available to 

the GoM. Normally, a new PPP Unit will have one or more full-time International Advisors. 



Final Report 

These Advisors are usually funded via donor contributions. After a few years, the Advisors’ 

skills are transferred and they are no longer needed. 

Most PPP Units have two or three core functions, each managed by its own department. In 

many countries, development of the PPP Unit’s functions, organization, and authority have 

generally followed the phases highlighted on the following page. The Malawi PPP Unit will 

already have capacity inherited from the PC, so it can begin at Phase II and evolve to Phase III 

over a 5-10 year period. PPP projects will require ongoing government involvement and there 

will be a need to have a constant guiding presence in reaching out to the market to identify and 

execute PPP projects in many different sectors. In Privatization although the transaction 

technically ends when the asset sale is completed, there is usually an expectation or even a legal 

requirement that the subsequent service provision by the private operator must conform to 

certain specified standards. This is always the case when a Privatization transaction involves a 

regulated industry and/or public utility. 

The PPP Unit could have three main functional areas: (1) a Transactions function, to support 

the analysis, structuring, bidding, evaluation, and negotiation of projects consistent with MoF 

approval; (2) a Monitoring & Compliance function, to monitor and ensure compliance with the 

PPP contracts that have been approved by the PPP Unit; and (3) Education and Promotion 

function to reach out to line agencies and stakeholders on how to plan and implement PPP and 

how to use the guidelines and procedures essential to project success. There would also be a 

need for a minor finance and administration function in which accounting, financial reporting 

and control, office management, human resource management, and administration are 

conducted. 

In the Transactions function group, personnel must be capable of managing all phases of the 

PPP Project Life Cycle, i.e. project identification, analysis, structuring, tendering, negotiation, 

and monitoring. Personnel in this functional group should have skills in at least: 

International & domestic lending and banking; 

Financial analysis & risk assessment; 

Asset management & technical assessments; 

Transaction negotiations, both legal and financial; 

Legal agreement/contract preparation and management; and 

PPP Economics (affordability, value for money, risk allocation). 

V.E. 

Phases of PPP Program Evolution 

PPP Programs typically go through three phases of evolution. For this reason, PPP Units need 

to be flexible and scalable as the nature and volume of their activities changes while the national 

PPP Program goes thorough its life cycle. 

The chart below summarizes the key elements of this life cycle. 



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Three Phases of PPP Unit Evolution 

Phase I: Policy and Coordination Unit. Governments initially establish the parameters, guidelines and 

procedures but with limited enforcement – hoping that PPP projects will flourish and that the private sector is 

keen to invest. While an important first step, most countries realize quickly that setting a PPP Unit or program is 

insufficient without clear cut objectives, rules, regulations, training, marketing and political support. 

Phase II: Command and Control. In reaction to failures or inability to limit public financial risk, some PPP Units 

then transition to greater capacity and control. They usually then retain substantial approval authority and project 

veto power leading to higher quality projects and adherence to market based approaches, professionalism and 

transparency. 

Phase III: Decentralization and Adherence to Common Standards. In this phase, after PPP procedures and 

rules are implemented successfully over several years, most governments are confident that the line agencies 

and local government have the capacity to plan and implement PPP projects with assistance from the PPP Unit 

and outside consultants. This is the trademark of a mature PPP program and in fact, in some cases, the PPP 

Unit transitions to a different organization one that is less about oversight and now focused more on results and 

implementation. 

The appraisal of project opportunities by the PPP Unit will involve several stages. The first 

stage is a generally project viability assessment, with a focus on Affordability for government 

and consumers. The second is a more detailed analysis, based on a pre-feasibility study and 

focused on Risk Allocation. The third is a comprehensive analysis of the feasibility study, with 

a focus on Value for Money. The chart below provides an example of workflow in a successful 

PPP Unit. 



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Example of Workflow Based on Republic of South Africa's PPP Unit Model 

V.F. 

Terms of Reference for PPP Unit Staff Positions 

With regard to staffing, this Consultancy proposes to give the PPP Unit a ‘professional face’ to 

support the line ministries and other PPP initiatives. PPP project initiatives and sponsorship 

will be the sole responsibility of government and private sector initiatives taken outside of the 

PPP Unit. If a line ministry has a major PPP project, the question is what type of support would 

it need that is not already in hand within the various Government bodies? The answer is 



Final Report 

possibly the experienced PPP professionals who will work in a hand on and practical manner to 

take the project through the various feasibility stages. 

If the levels of competencies that are 

required within the PPP Unit are 

examined, there would be a clear view 

of the staffing profile and level of 

service required. The emphasis should 

be on ‘self-supporting’ senior and 

experienced officers; without the 

requirement junior support staff. 

However, there will be PPP resources 

required that will be external to the 

PPP Unit. These external resources 

will be very specialized, technical and 

financial expertise that could not 

possibly be sustained within any one 

PPP Unit. Therefore, when PPP Unit 

staffing needs are considered, one must take the view that it will specify, appoint, monitor, and 

evaluate the work of external specialists/ consultants to support a variety of industries, utilities, 

and service sectors across the whole spectrum of the economy. Experts who evaluate PPP 

feasibility studies within the PPP Unit should themselves be more than competent in the areas 

listed in the box to the right. A PPP Unit with this level of expertise can be a very effective unit, 

delivering a critical evaluation of the sponsored projects through the various feasibility 

approval stages, while leaving the final decision to Government policy and oversight. 

V.G. Project Development Facility (PDF) 

Skills Requirements for PPP Feasibility Studies 

 

 

 

 

 

 

 

 

 

 

 

 

Banking & investment 

Asset management (utilities engineer) 

Risk management and project structuring 

Economic and financial analysis 

Infrastructure development and service delivery 

Bid and tender procedures and documentation 

Project promotion and marketing 

Legal contracts 

Contract compliance monitoring and management 

Transaction negotiation and analysis to ensure affordability, 

value for money, and risk management/allocation 

Fund management 

Public relations 

N.B. Early on, many of functions could be outsourced until the 

level of activity justifies in-house capacity. 

The Project Development Facility (PDF) may fund a significant portion of a project's feasibility 

consultant costs. The PDF recovers these funds from the successful private party bidder after 

the financial closure of the PPP. The costs of procuring PPPs, and particularly the costs of 

feasibility consultants, are significant, and often put a burden on the budget of the sponsoring 

agency. But quality advisory services are fundamental to procuring affordable, value-for-money 

PPPs, with adherence to the PPP procurement requirements set out in PPP regulations. 

Government and Donors should establish the PDF as a vehicle for sponsoring agencies to 

source funding for a portion of the feasibility consultant costs, and thus reduce the impact of 

PPP procurement costs on sponsoring agencies' budgets. Ideally, also, the PDF should increase 

the quality and quantity of successful deals that are processed through the PPP Unit's project 

pipeline. The PDF should be established as a fund with a limited life span. It will wind down its 

operations after ten years, by which time PPPs will be well established and their procurement 

will form part of sponsoring agencies' budgeting. Although the PDF is designed to be a 

revolving fund, in the sense that consulting expenses are reimbursed by winning bidders, some 

deals supported by the PDF will never be recovered because the deal never reaches financial 

close. This creates a natural “leakage” of funds that will, over an estimated 10-year period, 

deplete all the funds provided in the original round of grants and contributions. 



Final Report 

While the PDF will play an important role in assisting sponsoring agencies to procure PPPs, the 

sponsoring agency's ownership of the project is essential to the project's success. Thus, the PDF 

will not assume responsibility for procuring or managing a PPP project. In accordance with 

applicable laws and regulations, these functions reside with the sponsoring agency. Although 

the PDF appoints consultants and supervises their work, the consultant’s client is really the 

sponsoring agency. The consultant’s contract is with the sponsoring agency, subject to PDF 

oversight for quality and cost control. The PDF is not a source of grants to sponsoring agencies. 

Fees are paid directly to the consultant by the PDF. 

Because the PDF has to recover the funds it disburses to the maximum extent practicable, it 

requires successful deals. This means that before projects are proposed to the PDF for funding 

feasibility analysis, the PPP Unit assesses the project for likelihood of success. Only projects 

recommended by the PPP Unit are eligible for PDF assistance. There are two additional factors 

regarding Project Sponsors: 

o 

o 

The sponsoring agency will have to share at least some of the cost of the feasibility 

analysis; and 

The project will not receive government support unless the feasibility analysis indicates 

that the proposed project is viable, and the PPP Unit confirms that finding in its own 

assessment. 

Although the PDF should receive some form of support from Government, either cash or inkind 

contributions, such as office space and/or support staff, most of the funding for a PDF 

usually comes from donor grants. Accordingly, 

the governing board of a PDF always includes 

representatives of the donors that contributed 

funds. Procurement policies and procedures 

used by the PDF must comply with those of the 

donors who contributed funds, as well as those 

of Government. The PDF must be financially, 

and politically, independent from Government, 

to assure impartiality in the project feasibility 

analysis process. 

PDF Project Size Definitions 

Small Projects: 

≤ 12 month turn around time 

≤ $3 million funding requirements 

Medium Projects: 

1-2 year turn around time 

~$10 million annual funding requirements 

Large Projects: 

2+ year turn around time 

≥ $10 million annual funding requirements 

The PDF funds feasibility studies for small, medium and large PPP projects across all sectors 2 . A 

good “rule of thumb” is that over the ten years of the PDF's operation a total of 45 small 

projects, 24 medium projects and 8 large projects will be supported, and of these 75 percent will 

be successfully closed. These assumptions will be tested over time and the PDF’s budget can be 

adjusted if needed. The size of a project is determined by its anticipated turnaround time and 

funding requirements as summarized below. 

Core activities of the PDF 

The PDF is a single-function, semi-autonomous entity. It has its own Head and its own 

Governing Board. A PDF usually also has a committee for financial decisions, and often several 

committees focusing on specific sectors. The Heads of PPP Unit and PDF are at the same level 

2 

Smaller projects allow the PDF a faster turnover of funds. 



Final Report 

and work as colleagues, with different areas of responsibility. The PDF must have a 

professional accountant to record all financial transactions, and its own bank account, for which 

the accountant maintains the financial records. Any disbursements from the account above a 

certain amount must include the written approval of the Head of PDF, and large disbursements 

will require also the written approval of the Chairperson of the Governing Board. The Head of 

PDF has the same reporting relationship with MoF as the Head of PPP Unit, though each 

reports separately. The legal structure of a PDF is somewhat like a Trust, and the Head of PDF 

along with its Governing Board have a fiduciary responsibility to preserve the funds and ensure 

they are spent properly. The PDF always has an annual audit performed by an independent 

certified auditor independent of Government. 

The PDF is regulated in terms of PPP regulations and must accordingly comply with Generally 

Accepted Accounting Principles (GAAP) or the equivalent in its host country. The accounting 

system subscribes to, and complies with, the requirements of public procurement and auditing. 

The accounting system supplies financial information in the format and with the frequency 

required by PPP regulations and the donors. 

PDF Funding Process and Interface 

with PPP Unit Approvals 

The PDF will only provide funds once it 

has evaluated and approved an 

application submitted to it by the PPP 

Unit, along with the PPP Unit’s initial 

appraisal of the proposed project. 

Although Project Sponsors are the 

ultimate beneficiaries of PDF support, 

access to PDF funds is available only via 

the PPP Unit, i.e. project sponsors cannot 

apply directly to the PDF for assistance. 

8 Steps in the PDF Funding Process 

1. Project Sponsor submits project proposal to PPP Unit 

for initial assessment 

2. PPP Unit performs assessment and gives Level I 

approval to proceed to pre-feasibility study 

3. PPP Unit submits funding request to PDF 

4. PDF evaluates application and sets budget 

5. Contract is executed between the Project Sponsor and 

Consultant, within PDF-defined budget 

6. Pre-feasibility study is completed and submitted to the 

Project Sponsor, PPP Unit, and the PDF 

7. The PPP Unit re-assesses the project and grants Level 

II approval to proceed to feasibility study 

8. The same process as above repeats after the 

feasibility study is approved, leading to PPP Unit 

approval Level III, which authorizes the Project 

The box above summaries the steps in PDF approval, and funding for feasibility analyses. The 

process always begins with PPP Unit assessment. PPP Unit Level I approval results in the 

project being submitted to the PDF with a request for the funding of a pre-feasibility study. 

When the study is received and approved by the PPP Unit, the Project Sponsor may issue an 

RFQ within which will be results of the pre-feasibility study. This approval by the PPP Unit is 

Level II, the result of which will be a request for the PDF to provide the funding for a feasibility 

study. When that study is received and approved by the PPP Unit, Project Sponsors may issue 

an RFP. Upon receipt and approval of the feasibility study, the PPP Unit will consider issuing 

Level III approval to engage in contract negotiations with the Preferred Bidder. 

The PDF Evaluation Committee(s) 

The PDF Evaluation Committee(s) is responsible for evaluating and selecting which projects 

proposed by the PPP Unit for PDF support, will receive such support. The PDF may have one 

such Committee, or it may elect to have several such Committees, usually divided by sector or 

by size of project. The Committee should be made up of not more than five members; an even 

number of members is required to avoid tied decisions, and having only 3 members would 



Final Report 

probably not enable sufficient points of view. The Committee must meet within 1 week of 

receiving the application for PDF support from the PPP Unit. 

Evaluation Criteria: When making its decisions, the Committee should consider the following: 

About the Project Sponsor: 

 

 

 

 

 

 

 

Does the sponsoring agency have external funds available, e.g. national budget, PSIP, 

donors, etc. for its share of the costs of the PPP project? 

Does the sponsoring agency have internal funds in its budget for its share of project 

costs? 

Has the sponsoring agency recently procured a PPP project (successfully or 

unsuccessfully)? 

Will the sponsoring agency's strategic goals be achieved by the project? 

Has the sponsoring agency made a commitment to fund the project procurement and 

feasibility consultant costs, including cost-sharing arrangements with the PDF? 

Has the sponsoring agency appointed a suitably experienced and qualified project 

coordinator who has the skills and authority to make decisions necessary for project 

development? 

What is the sponsoring agency's history of PPP project procurement, and does that 

indicate a probability of adequate commitment to this project? 

About the Sector: 

 

 

 

 

 

Is this the first time a PPP would be procured for this sector? 

Have any similar but non-PPP projects been procured in the sector? 

Is the project in a sector that is a priority for Government and/or the donors? 

Is the proposed project in the social services sector? If so, will the project provide a 

core or support function for which Government should make an investment for 

economic returns? 

How will the project’s economic benefits be viewed vis-à-vis its financial benefits? 

About the Project: 

 

 

 

 

 

Has the feasibility consultant been selected according to applicable PPP procedures? 

Was the PPP Unit represented on the bid evaluation panel, or have full transcripts of 

the bid evaluation procedures been provided so that the PPP Unit can ensure 

compliance with the procurement principles of fairness, transparency, competition, 

and accountability? 

Do the milestones for feasibility consultant payments put the feasibility consultant at 

risk if financial closure is not reached, or are their success fees built into consultant 

compensation structure that could compromise the consultant’s neutrality in 

determining its findings? 

Are the feasibility consultant costs proportional to project value? 

What is the project's capacity to generate private sector capital investment or 

generate service delivery improvements in non-capital intensive projects? 

Has a “market sounding” been conducted and has the private sector demonstrated 

sufficient interest and capacity for collaborating on the project? 



Final Report 

 

 

 

What are the results of the Consumer Demand, Affordability, and Willingness to Pay 

Survey? 

What service delivery outcomes and improvements are expected from the project? 

What are the Service Delivery Standards, and can those Standards be complied with 

through operations and maintenance costs that are sustainable? 

About the Funding: 

 

 

 

 

 

 

 

Has the feasibility consultant’s cash flow projections been verified by the PPP Unit's 

project advisor, and do they enable a competitive Financial Internal Rate of Return? 

Given prevailing market expectations regarding Equity Financial Internal Rate of 

Return, can tariff levels required to achieve such return be realistically attained given 

the consumer profiles and willingness/ability to pay, and political factors impacting 

tariffs? 

Are the potential funding sources identified in the “market sounding” credible in 

terms of their track record of success in similar projects, and their financial capacity? 

Is the proposed debt-to-equity ratio within generally accepted gearing limits for this 

sector, and are any Government guarantees or contingent liabilities required to 

secure the debt? 

Will the projected cash flows provide sufficient assurance of debt service, in 

particular does the debt service coverage ratio comply with generally accepted 

norms for the sector? 

Is there a “take-or-pay” off-take contract that requires Government to pay for 

capacity even if consumption levels and/or Accounts Receivable collection 

performance does not provide the required cash flow to make payments required 

under the contract? 

Is there a supply contract, e.g. fuel supply for a power generator, for which 

Government must provide a guarantee, or if supply costs pass through to the 

buyer(s) can the buyer(s) afford it? 

Because the PDF operates like a Trust and its Governing 

Board sets policies consistent with its fiduciary 

responsibilities, the contributors of the assets of this quasi- 

Trust have broad discretion in the instructions that they 

give to the Governing Board. These instructions can be 

adjusted from time to time as circumstances change. As is 

the case with a Unit Trust for investment purposes, those 

providing the Corpus of the Trust may collectively, or in 

some cases individually, instruct the Board (analogous to 

PDF Project Priorities 

The PDF policy board will set annual 

priorities for the types of projects to be 

funded by the PDF, and make these 

public. Projects that fall outside these 

priorities will not be excluded from 

getting PDF funding, but the PDF 

priority will be one of the factors taken 

into account. 

the Fund Manager in an Investment Trust) how they want their money to be invested. As is the 

case with an Investment Trust, these investment decisions reflect the mix of risks that the 

investors want to have in the Trust. Therefore, the contributors to the PDF may, from time to 

time, instruct the Governing Board regarding their preferred risk profile. Some PPP projects 

may have a relatively high level of risk (international PDF experience has been that a high-risk 

project is one that has about a 25% probability of not reaching financial closure) and other may 

offer lower financial and economic returns but have commensurately lower levels of risk. The 



Final Report 

responsibility of the contributors to the PDF is to keep the Governing Board informed of its 

preferred risk/return profile. 

For some donors, their contribution to the PDF really is an investment. For example, when 

development finance institutions like IFC and KfW make contributions to a PDF, one of the 

reasons why they do it is that the PDF is likely to generate a continuous “bankable” deal flow of 

projects that they can finance. A return on funds invested in the PDF is provided through the 

financing of these projects. Similarly, when a government invests in a PDF, it may perceive that 

as an investment for future economic returns. Due to these factors, a PDF must operate like an 

investment trust, rather than a source of free money for Project Sponsors or a “give away” 

program for feasibility consultants to use for lining their pockets. 

A project's eligibility for funding is assessed under three categories: 

‣ Priority – does the project fit within one of the categories of priority projects; 

‣ Risk – does the risk/return profile match that specified by the contributors; and 

‣ Treasury – is the proposed expenditure consistent with fiduciary responsibility of the 

Governing Board to manage the PDF in accordance within policies set by the 

contributors. 

Each category has its own rating. Each category then feeds into a matrix that is used to decide 

whether funding will be provided unconditionally, on certain conditions, or if no funding will 

be provided. 

V.H. 

Organizational Structure and Profile of PPP Unit Staff Positions 

The PPP Unit will require a few very senior professional staff, at least one full-time international 

advisor(s) (for a period of 2-5 years until skills can be transferred) plus some essential support 

staff and access to office services and related resources. There will also be a need for mid-level 

professionals, who can be either locals, who have a particular area of technical expertise (such 

as accounting, financial analysis, engineering, and contract management) or expertise in a 

particular sector. Regardless of the organizational structures or systems in place, the quality of 

the PPP “working” management team will be the most critical factor. Most of the other support 

requirements will be short-term specialists with minimum training requirements. 

Proposed Management Structure of the PPP Unit 

The figure below shows a possible management structure of a “mature” PPP Unit. 



Final Report 

PPP Unit Internal Management Structure (Mature State) 

Managing Director 

PDF 

PPP Advisor (s) 

PA & PRO 

Head of PPP Projects 

-Banking & Invest. Mgr. 

-Chief Financial Analyst 

-Transaction Mgrs. & 

Transaction Spec. 

(by sectors) 

Head of 

Contracting & 

Compliance 

-Legal Contract Mgr. 

-Risk Mgmt. 

-Asset Mgmt. 

-Monitoring & 

Compliance 

-Legal Asst. 

Head of Education & 

Promotion 

-Public Education & 

Promotion Spec. 

Professional Staffing Estimate: 10-12 

Project Matrix Management Structure & Modus Operandi 

While the structure set out above appears is a traditional departmental structure; the PPP Unit 

would need to function less rigidly, using matrix management. As with the current PC, while 

having a traditional organization structure it has successfully adopted a matrix project 

management approach to handling its various projects, with key personnel for various 

departments/functions overseeing the various projects. 

This internal management structure relies on clear points of accountability and responsibility 

within a project management structure rather than fixed lines within a management hierarchy. 

There is less reliance on line management but heavy reliance on very good project management 

reporting and monitoring systems. Professional and technical support staffs undertake the main 

core organizational deliverables through a systematic project management model. Depending 

on the type of project, functional specialists (e.g. Transition, Legal, Economic, Financial etc.) all 

can also be involved in project transactions. The Project Matrix Management’ approach places 

less emphasis on hierarchical line management, with a very flat structure and ‘hands on’ 

approach to work and deliverables against specific deadlines. As one project ends and new 

team is formed according to the person specifications required of the strict hieratical 

management structures. An example will be if their some continuation of privatisation work to 

be done and PPP work, while these are different type of projects, the same personnel will 

deliver both, without departmentalization of the work. The chart below illustrates this 

approach. 



Final Report 

Project Matrix Management (illustrative) 

Cross Functional 

Specialist 

Requirements 

Function 1 – Director 

of PPP Projects 


of Procurement and 

Contract Compliance 


of Risk Management 

and PDF 


of Administration and 

Accounting 

Project A 

Manager 

Project B 

Manager 

Project C 

Manager 

Project D 

Manager 

Project E 

Manager 

Project Management Organization & Contracting External Consultants. 

The IP3 team envisages that the structures and management of the PPP Unit would be 

organized as a project management organization. Staffing, resourcing, and deliverables 

represent workloads and can be expanded and contracted as required. The setting up internal 

and management structures to work in this way is part of the PPP Unit’s capacity and training 

plan. The main focus will be on deliverables. Specialist staff may be recruited just for the 

duration of a PPP project and, if their performance warrants, may move on to employment 

within the PPP Unit. 

In addition to recruiting project personnel, the Unit will work very much in the manner of the 

current PC, with the appointment of local and international specialist consultants. The 

development of ‘local’ consultant capacity will take some time and resources. Indeed a selective 

list may need to be exposed to the capacity building proposed for PPP Unit staff and line 

ministry Project Transition Managers. The appointment and development of the capacity of 

‘local’ contracted consultants may be achieved through the PDF under the watchful eye of the 

Contract Monitoring & Compliance Department of the PPP Unit. 

Potential Core Staffing of the Mature PPP Unit 

The chart below illustrates a potential staffing plan for a Phase III PPP Unit. 



Final Report 

Core Staffing for the Mature & Fully Established PPP Unit 

Director General 

Public Relations 

Officer 

Admin Assistant 

Plus PDF Manager 

Suggested Senior and other Key Personnel 

Head of PPP Projects 

Chief Economist 

Banking & 

Investment 

Financial Analyst 

Manager & 

Transaction Advisors 


Head of Monitoring & 

Compliance Unit 

Contracts Specialist 

Asset Manager 

Legal Advisor 

Risk manager 

Monitoring & 

compliance 

Bid Marketing and 

Comm. Specialist 


Head Education and 

Promotion 

Public education & 

promotion specialist 

Total: 10-12 + ( additional Transaction Co-ordinates and Monitoring personnel will be required as the 

number of projects expand) 3 

Recruitment Requirements 

An open and transparent approach to recruitment at all levels is a requirement to obtain the full 

confidence of the industry and the public. This Consultancy has been made aware of the 

pressure to attribute jobs to less than qualified individuals and the external attempts at 

interfering with the openness of the selection processes. For the PPP program to achieve 

optimum success the public service guidelines for recruitment must be strictly enforced, and 

resources will need to be 

sourced from the private 

sector. For all PPP Unit 

personnel the compensation 

packages should be in line 

with similar positions in the 

private sector. 

IP3 suggests that any 

legislation required to set up 

a PPP Unit should clearly 

indicate transparent 

appointment procedures and 

contain a profile of key 

positions with minimum 

standards required, with an 

emphasis on specialist 

experience, including the 

Board or Unit level. There is 

a public perception that 

appointments of Board 

Selected Recruitment Best Practices 

 

 

 

 

 

 

 

 

 

Preparation of a set of pre-selection documents including: 

o A competency model for the job – range of capabilities 

o A full person specification/ profile 

o Job outline with performance criteria; 

Advertising of all positions publicly 

PPP Unit policy on pressure tactics/ lobbing should lead to automatic 

disqualification of the applicant; 

Independent pre-interview screening process, selection test 

administered where possible; 

Two levels of interview, first stage, independent assessment of the 

suitability of candidates for selection, second stage, the actual 

selection of a few suitable candidates with an Interview Panel; 

Interview Panel should have at least one external independent 

member, preferably in the chair; 

‘Oral’ and written reference undertaken prior to any appointment; 

Final approval of a Director General or Director level candidate should 

be approved by the Board or the Unit, based on its legal structures; 

and 

Final approval of the PPP Unit Chairman of the Board or Unit, based 

on its legal structures, should be at Presidential or Minister of Finance 

level approved by the Parliamentary Appointments Committee (PCA). 

3 

Including administrative support staff; excluding drivers and messengers, and assuming Transaction Advisors will be engaged from 

time to time on an as-needed basis, with total time equal to 1 Transaction Advisor. 



Final Report 

members are based neither on open and transparent procedures, nor on selection of expert 

candidates but rather representation of a particular interest group. This is a very important 

body, which must manage risk factors and whose decisions will have a very long-term effect on 

the country, therefore best practice is recommended. IP3 suggests following the ‘South Africa 

King II’ recommendations to ensure appropriate corporate Governance. 

Training Requirements of PPP Unit Staff 

Training & development should be an integral part of the PPP Unit’s planning and operations, 

and should reflect best business practices, from which training needs can be formulated. The 

training needs that arise from these best practices will determine the training needs. 

Capacity Building Plan 

A number of initial interventions have been identified to support the initial capacity building 

needs of the PPP Unit. The overall aim is to build a strong PPP project management approach 

to accelerate the PPP work program proposed. The program focuses on key technical 

competencies that need to be developed by staff working together on PPP and Privatization 

transactions, and supporting functions. 

Organizational Approach 

Training and development should not be seen as just ‘off the job’ seminar, lecture, conference or 

workshop etc., while these are useful for individual specialization and ad hoc training needs. To 

support the overall staff training and 

development more initial emphasis 

need to be placed on in-house 

workshops and skills transfer via onthe-job 

training. The overall approach 

is to work to be sure that the transfer 

of skills through effective in-house 

training and shared experience. The 

schematic shown below encapsulates 

this approach and the underlining 

support mechanisms that have to be 

in place to achieve the desired result. 

The PPP Unit may need to appoint for 

initial start up stage an Organizational 

and Institutional Development 

specialist. 

The aim here is to ensure that the 

training is accessible to all staff and 

Best Practices in Personnel Development: 

A Checklist of Required Documents 

Annual Business Plan (reviewed quarterly, with Mission, Goal and 

Objectives and Values; 

Design of organization communications model to meet the 

internal and external stakeholders needs; 

Development of personnel competency models for functional 

and organizational roles (reviewed every year); 

Writing of recruitment Person Specifications (which should be 

reviewed as each vacancy occurs); 

Preparation of comprehensive Job Outlines, linked to KPIs 

(annual, with bi-annual review), incorporating: Key task objectives, 

Criteria for success (KPIs) and Accountability (see template in 

Appendix II); and 

Performance Planning & Review (PPR) system with two-way 

feedback, linked to individual performance contracts. 

stakeholders, rather than just seeking single international training for one or two personnel. 

This should be reserved for specialization, with the core concepts being delivered in Malawi 

during this stat-up phase. 



Final Report 

Another idea will be for the PPP Unit to “twin” with a mature and well established PPP Unit in 

Africa, Asia, or Europe to support training and sharing of information. South Africa has the 

advantage of proximity, and has a Public Finance Management Act similar to that of Malawi. 

Knowledge Retention & Transfer 

Knowledge retention & transfer is a major topic in many organizations. Retention of knowledge, 

management of information, and development of underlying supporting structures has to be an 

emphasis in any organization, including the new PPP Unit. As there was universal agreement 

that the new PPP Unit should be small and agile, development of underlying support structures 

would require having a backup person who is able to assume responsibility for PPP transaction, 

and to support cross training and development of professional and technical staffs. 

The common way is to have at least one senior person shadow another person. We suggests the 

‘shadowing’ can be simply allocation of responsibility to ‘shadow’, this will not necessarily 

mean attending meetings, only to ensure to set up regular briefings with their counterpart, go 

through files and report issues and support quality assurance of documentation etc. This is one 

of the best ways of cross training and developing supporting professional and technical staff. 

We suggest that the supporting professional and technical people undertake more of project 

management and documentation, tracking progress and logging into an Access database. In 

addition, the PPP Unit can through this process develop a standardized up to date project filing 

system. This will ensure that a lot of the details of project management are not lost and there is a 

better appreciation of project tracking, monitoring, and recording of transactions, with the 

Project Transaction Manager being primarily responsible for implementation rather than 

tracking, monitoring, and recording. 

V.I. 

Relationship of PPP Unit to Other Government Departments and Agencies 

We evaluated the relationship between central Government Departments and their Agencies. 

The IP3 team examined in particular the Office of the President & Cabinet (OPC) together with 

the Department of Statutory Corporations (DSC) and the Privatization Unit (PC), the Ministry 

of Trade and Private Sector Development (MoTPSD), and the Malawi Investment Promotions 

Agency (MIPA) and Export Agency, the Ministry of Finance and the Public Enterprise Reform 

Monitoring Unit, as well as the Ministry of Economic Planning & Development (MoEPD). 

The Role of Ministries in PPPs 

In identifying the institutional framework for the PPP Unit, see Chapter 4, the team highlighted 

the central role of line ministries. Ministries are required to identify, promote and champion 

PPP projects, in which the Unit will play a supporting role in assessing affordability, value for 

money and potential risk transfer to the private sector through a three-stage feasibility process. 

The PPP Unit is there to support the output, not act as another level of bureaucracy. 

The approach and relationship required by the PPP Unit and the line ministries including their 

SOEs are at the opposite end of the spectrum for the privatization process. Under new PPP 

initiatives, SOEs have to commercialize and strengthen their operations to match those of 

potential private sector partners. This will call for initial investment to improve those areas 



Final Report 

within the capacity of the SOE in order for the latter to get ready for the potential ‘marriage’. 

This process in some industries may take a number of years to achieve before the PPP project 

can be realized. On the other hand, there are many ‘green-field’ PPP project opportunities 

without the direct involvement of SOE, where the government offers land, resources and or 

services. The role of the Ministries is both central and critical to the PPP process. To support 

PPP initiatives in the Ministries there will be a need for senior PPP transaction managers to be 

in place within the Ministries to work with the proposed PPP institution structures. 

To support PPP projects initiated by the Ministries and other agencies, a counterpart 

Transaction Coordinator of a caliber similar to that of the Sector Transaction Managers in the 

PPP Unit should be appointed by the sponsoring line ministries for large-scale PPP projects. 

Therefore, after the initial ‘green light’ to complete a PPP feasibility study, ministries can 

commence with the appointment of a contract PPP Management Resource to be based in the 

sponsoring Ministry or organization, creating a “PPP Node.” This will build up the expertise 

and capacity within the line ministry as the PPP process gathers momentum. 

Local Authorities and Regional Government Institutions 

In a manner similar to that of line ministries, one would expect to see regional organizations 

being proactive by identifying and sponsoring PPP projects, either alone or in combination with 

other local interest groups, while seeking technical guidance from the PPP Unit. When working 

at a regional or local level there are differences in the types of projects, the scale, and needs in 

the regions. Once the Project Development Fund (PDF) is established direct support will be 

available to regional and local governments for PPP transactions. 

Case Example: PPP and Local PPP Initiatives in South Africa 

One of the major issues identified in South Africa was the level of additional support local authorities; government 

institutions and even community councils need to commence the PPP project initiatives. Indeed in South Africa 

had a specialist support structure was established to help develop local initiatives at the start of the PPP projects. 

Since then the need for additional support has decreased, due to hands on experience gained by local 

Municipalities. Therefore, PPP concepts are now well understood throughout South Africa and the role of the MIIU 

after some years as ceased. 

M unicipal Infrastructure Investm ent U nit (M IIU ) 

USAID 

(U SA ) 

$ 

£ 

DFID 

(UK) 

R 

Government of 

South Africa 

S. Africa 

Private 

Sector Reps 

& NGOs 

6. Release 

Funding 

M SP Project 

Development 

Grant Fund 

($4 m) 

Private 

PPP 

Advisors 

M IIU Board of Directors (10) 

2. Approve 

M IIU Professional Staff (8) 

Funding 

USAID Tech. Asst. 

3. ToR for PPP 

1. Request for PPP 

Advisors 

Tech. A ssistance 

4. Issue RFPs for A dvisors 

5. PPP Feas . S tudies, D raft 

Contracts, Bid Evaluation, etc. 

Local 

A uthorities 

7. P PPs 

Private 

$ 



Final Report 

Procurement Procedures and Compliance 

The ODPP has for many years been working on PPP initiatives. It was originally set up to 

facilitate the contracting-out of government services. This has been very successful in 

encouraging ministries and institutions to contract to the private sector services for the 

provision of security, cleaning, laundry and catering. Since then it has developed regulations for 

contracting services and for concessions to support PPP projects. 

The role and structures of the ODPP are ideal for supporting PPP oversight. It has a Monitoring 

and Enforcement Department, a Regulation Advice and Review Department, which in an initial 

examination, fit neatly with the oversight role required without being ‘overbearing and directly 

controlling.’ It is recognized that this is an ideal place to support the PPP institutional 

framework. It is expected that a PPP Committee would be established in the PPP Unit to ensure 

compliance with all the ODPP requirements. It is also expected that they would be represented 

on the Committee. This would very much model the current procurement practices exercised 

within the PC, which have been working successfully for number of years. 

The ODPP PPP regulations as part of this study will have to be examined in more detail in the 

Second Interim Report addressing Policy and Legal Implications for establishing the PPP Unit 

once a final decision is made on the best reporting option for Malawi. 

Accessibility by all Private Stakeholders 

There has to be universal access for the private sector to all the institution’s structure, with good 

advice, information, and incentives to get involved. Very often there can be multiple 

components involved in putting a package together to support private sector investment. These 

include participation agreements from construction contractors, project operators, banking 

institutions, and donors, in addition to government bodies. Therefore the institutional design 

and ‘ethos’ is to be supportive rather than procedural, facilitating the PPP process for all 

participants. 



Final Report 

International Examples of Reporting Relationships for PPP Units 

MoF Reporting Structures 

South Africa - PPP Unit in National Treasury 

Sri Lanka - Independent Board with MoF Chairing the Board 

Egypt - PPP Unit in office of the Minister of Finance with a PPP promotion unit in Ministry of Investment 

Brazil - National Development Bank/MOF with implementation at State level 

Chile - Each Ministry has PPP Node, with national law & policy guidelines 

Reporting through Office of the President 

Philippines - Coordinating Counsel for Private Sector Participation (CCPPP ). View is the fluctuations in MoF 

attitude & budget toward PPP, which is long–term vision. MoF focused on the budget not on a national priority 

for infrastructure development while it is a assumed the President will strongly supportive with a long-term view. 

Jordan – Executive Privatization Unit (EPC), Office of the Prime Minister (King is Head of State). Unclear legal 

mandate for PPP, even though EPC is default PPP promotion and management organization. Lack of 

coordination with important line ministries, particularly water and planning. 

Malawi - ‘Dotted line’ relationship between the PPP Unit (P3CU) and the MoF & Risk Management Unit (RMU). 

Conflict between Presidential Vs MoF. 

1. Difficult over Monorail project – lack of competition in tenders 

2. Toll road scandals over the same issue. 

Developed Economies Reporting Structures 

The Netherlands - A PPP Knowledge Centre has been established within the Ministry of Finance with staffing 

from MoF and Economic Affairs. 

Italy - A temporary government body (the Unita Finanza di Progretto) has been established within the 

Economic Policy Committee a joint initiative involving Ministries of Public Works, Finance and Treasury 

The United Kingdom - Initially Treasury Taskforce more recently has given way to Partnerships UK (PUK) and 

the Office of Government Commerce. Independent of all these local authorities set up an association to support 

their initiatives Public Private Partnerships Programme (4Ps) 

Australia - The PPP program within Victoria is co-coordinated centrally by the Treasury. 

Ireland - Set up with an independent PPP Unit within the Ministry of Finance. 

Overall Working Relationships 

The team has proposed to strengthen the role of regulation and ensure its independence more 

so of the line ministries involved in PPP. The intent is to place the line ministries, municipalities, 

and community groups into a central role in the promotion of PPP projects through the PPP 

Unit. Due to the need for financial approvals for the main stages of PPP feasibilities, the MoF 

has a direct role in either managing the PPP unit or supporting its review of PPP proposals. 

Then there is procurement oversight by the ODPP to ensure openness, competitiveness, and 

transparency of the procurement process. 

Possible PPP Unit Reporting Structure 

The following figure illustrates possible reporting structures for the PPP Unit to guide and 

manage its relationship with other government departments and agencies. 



Final Report 

Possible PPP Unit Reporting Structures to Be Developed 

Office of the President 

& Cabinet (OPC) 

Minister of Trade & 

Private Sector Dev. 

Export Board 

Malawi Investment 

Promotions Agency 

(MIPA) 

Minister of Finance 

(Including PERMU) 

& 

Risk Oversight 

Line Ministries 

& Possible ‘PPP Cells’ 

Plus other PPP sponsoring bodies, 

including ‘local’ community 

initiatives 

Minister of Economic 

Development & Planning 

Office of Director of 

Public Procurement 

PUBLIC PRIVATE 

PARTNERSHIP 

UNIT 

MRS ECONOMIC REGULATORS 

MACRA 

Proposed MERA/ MWERA 

Proposed TransRA 

Proposed Civil Aviation Auth. 

V.J. 

Human Resource Implementation Plan 

The final location and reporting structures for the proposed PPP Unit are yet to be decided. 

While we have defined the basic framework structures for the PPP Unit, the final decision 

regarding institutional setup will depend on Government’s response to the Cabinet Paper 

prepared by the IP3 team. 

Key Policy Areas 

From an institutional development point of view, there are at least ‘six’ policy areas, which need 

to be addressed: 

1. Funding 

2. Recruitment & Performance Contracts 

3. Remuneration 

4. Capacity Building 

5. Public Awareness 

6. Project Management Structures and Contracting External Consultants 

Funding 

Funding of the PPP Unit will be a critical factor. While the GoM assumes overall responsibility 

for maintaining and sustaining the PPP Unit, substantial donor support will be required. There 



Final Report 

will be a need for donor funding to provide international experts to work in the Unit until their 

skills can be transferred to local counterparts. In addition donor grant funding will be needed 

to provide the Project Development Facility (PDF) with funds to finance feasibility studies. In 

time there may be a case for recovery of cost from the proceeds of PPP transactions. However, 

we do not see this in the early years of operation. This source of funding is being tested in the 

UK at present, with a reluctance of line-ministries to pay for PPP Services other than fund part 

of initial feasibility studies under the PDF arrangements. 

Recruitment & Performance Contracts 

Recruitment procedures have been set out in this report. It is important, as this Consultancy 

team has emphasized all along, to secure the services of personnel already fulfilling similar 

roles within the various Government Departments and State Agencies. In particular, the team 

would like to see the utilization of the PC Transaction and Special Fund management personnel 

early in the recruitment process, including economic support from the MoEPD, investment 

from the MIPA, financial analysis from the PERMU and redundant staff from the MDC etc. If 

this can be achieved early in the establishment of the PPP Unit, then the recruitments can be 

accelerated. It is still necessary to advertise in a competitive manner the key posts identified. 

The PPP Unit is not an administrative or an oversight unit strictly; but a supporting 

organization to deliver outputs based on a project management methodology. This Consultancy 

team therefore expects to see all appointments on fixed term performance contracts, in the case 

for particular infrastructure project for the defined term of the project. It is recommended, that 

external project specific consultancy contracts be offered rather than the recruitment of staffs 

into the PPP Unit, in order to keep the PPP Unit small. 

Capacity Building Training Plan 2006- 2007 

While the IP3 team has identified the core competencies required for promotion and introduced 

a PPP Unit within a project management system of working, there is a serious requirement for 

PPP capacity building. The earlier this is addressed the better it would be not only for the PPP 

Unit but also for line ministries. The competencies required to mount a successful PPP Unit 

have been identified. The line Ministries, in addition to the PPP Unit staff need to have an 

excellent understanding of the working of the PPP Unit. We have suggested for large-scale 

projects line ministries should appoint their own ‘PPP transaction’ counterparts to the PPP Unit 

for the line ministries PPP Nodes. 

Public Awareness 

One of the broader considerations in setting up the PPP Unit is the need to communicate known 

factors now. In South Africa, a major effort went into the communication of the work of the PPP 

Unit. The Consultancy team believes that there is need to be able to communicate known 

factors, so as to reassure stakeholders of the approach, role and time-tables or establishment of 

the PPP Unit. There are a number of line- ministries already active in formulating PPP 

Strategies e.g. Ministry of Health, the MoTPW implementation of a new rail concession without 

understanding the proposals for the PPP Unit. 



Final Report 

A firm plan does not have to be presented now but rather the intent for the future vision, 

mission and objectives for the coming year. The question of which legal structure, possible PPP 

policies, structures and organizational options are therefore only the means to deliver and not 

the objective in themselves. For example, the key elements of what the PPP Unit will be 

expected to deliver is known with a high degree of certainty. The Consultancy team suggests 

that is must be freely communicated now to stockholder’s possible topics we set out below: 

1. The Government and the public sector wish to exercise better management over the 

assets and operations now and into the foreseeable future 

2. Building new PPP businesses with strong effective operations and management 

structures as well as autonomy, while being responsible to Government policy and asset 

ownership. 

3. PPP working practices should be on par with the best local and international practices, 

which will be a ‘blue print’ for future employment models. 

4. The proposed PPP organization will move away from the civil service/public service 

poor practice more in keeping with a high performance organization, with the 

independent power of managing its own human resource policies, including the power 

to recruit; promote; develop and terminate. All PPP policies will be based on open, 

transparent and fair practice, emphasizing performance 

5. There will be regular PPP communication sessions to address concerns and set out the 

progress of PPP projects during the transition period in establishing a PPP Unit. 

6. The activities of the PPP Unit including the Government’s policy responsibilities for 

supporting pro-poor initiatives; addressing areas of healthcare, water, energy and 

transport. 

7. The Government, regulatory structures and operational and management structures 

within Government and State Owned Enterprises (SOEs) should be such as to have the 

capacity to attract Public Private Partnership (PPP) investment in the infrastructure 

needs. 

With these basic principles and communication blocks in place, work setting out the 

preparation of the groundwork for the transition to the establishment of PPP Unit can be better 

understood by all stakeholders including parliamentarians. This will support the smooth 

establishment of a PPP Unit confident in the future of the work program and their potential 

role. 

Terms of Employment and Pay Structures 

It is doubtful if current civil service salary will attract the right caliber of personnel to these key 

positions. Senior positions should be on contract, with substantially different terms from the 

civil service. If the PPP Unit is established as a parastatal outside the civil service then 

remuneration packages can be on par with the private sector. Private sector remuneration levels 



Final Report 

will allow for the recruitment of professional personnel with the depth of industry experience 

required to achieve rapid results. Accordingly, the PPP Unit could be established as a semiautonomous 

body, perhaps along the lines of the Executive Agency model incorporated into the 

draft PPP Act provided in the Annex to this report. 

Having said this, however, there are very successful PPP Units operating within the national 

Treasuries of several countries. Employees of these Units are civil service employees, and are 

both highly skilled and effective in their job performance. Civil service compensation levels in 

some of those countries, e.g. U.K. and Australia, are significantly higher than in Malawi, but the 

existence of successful PPP Units staffed by civil servants raises the following issue: 

Will the primary function of the Unit be: 

‣ Manage the process; or 

‣ Manage the transaction? 

This is a core issue in the design of the PPP Unit in Malawi, or in any country. If the primary 

function of the Unit is to “manage the process,” which means ensure that all PPP projects are 

tested for Affordability, Risk Allocation, and Value for Money, and that those approvals have 

been obtained before issuing the Request for Qualifications, Request for Proposals, and Contract 

Negotiations materials, respectively, or … 

Is the primary function of the Unit to actually perform the technical tasks required to apply the 

three tests associated with PPP project appraisal, assist the project sponsors in preparing all the 

procurement and contract documents, assist in contract negotiations, and generally provide a 

high level of technical support to the whole process, especially when there is capacity limitation 

on the part of the sponsoring agency? 

If we go to the extreme of Option 1, then we will probably end up creating nothing more than 

another level of bureaucracy. If we go to the extreme of Option 2, then we have created the 

equivalent of a boutique investment banking firm. 

The solution to this issue is to find the most appropriate middle ground given the particular 

environment of Malawi, and tailor the PPP Unit design to accommodate that environment. In 

doing so, we must recruit and train Unit personnel who will be able to provide technical inputs 

when there is lack of capacity on the part of project sponsors, but not so high a level of technical 

skill that we have to pay investment banking salaries in order to recruit them. 

Generally, the approach we recommend is more toward the “manage the process” option, but 

with the caveat that sufficient technical skill must be available in-house to help with managing 

the transaction when there is a capacity constraint on the part of the project sponsor. 

Remuneration 

This is possibly one of the more difficult areas for the GoM, which is seeking to reform its civil 

service pay structures and the growing differential in status between the many and various 

parastatals. IP3 has articulated the need for competitive pay structures comparable with the 



Final Report 

private sector to recruit and retain the level of personnel required for the PPP Unit. The 

Consultancy team has indicated that regardless of structure the right personnel within the PPP 

Unit will make all the difference. The merger of resources from the PC and other organizations 

is encouraged. The remuneration policy of the PPP Unit should follow Malawi best practice, 

proposed for a number of recent newly established parastatals. 

Below we discuss the remuneration options. The Consultancy team has identified the 

remuneration policies needed for the projects, and the competencies required to run, manage 

and deliver on PPP projects for Malawi. Possible compensation levels are in the budget for the 

PPP Unit included in this report. 

Budgets & Formals of Compensation Proposed 

The mode of remuneration adopted by the PPP Unit will largely depend on its legal status. If 

the PPP Unit is established as a Civil Service Department then the following conditions apply. 

 

 

Employment could be available on permanent and pensionable terms for all staff. 

It is possible under Civil Service status to employ some staff on special contracts as noncivil 

servants. 

If the PPP Unit gets established as a Project under a Civil Service Department then the following 

conditions would apply. 

 

It is possible to employ all staff on special non-civil service contracts. 

If the PPP Unit gets established as a statutory body, such a Unit or Commission or Executive 

Agency, then the following conditions would apply. 

 

 

 

Senior expert staff could be employed on fixed term contracts approved by the Board, 

while other general support staff can be employed on permanent and pensionable terms 

if seconded from the civil service. 

All staff could be on fixed term contracts while with the PPP Unit. 

Some staff could be on special technical advisory positions, not considered as part of the 

establishment. 

In establishing a PPP Unit, the Malawi Government will need to pay close attention to: 

 

 

The need for a high performance organization that is output or results oriented. For such 

an organization to be established, there will be a need for the institution to have a 

flexible competitive remuneration structure that allows for the recruitment and retention 

of high caliber staff. In this connection, employment for officers in senior management 

would have to be recruited on fixed term performance related contracts. 

The need for employment arrangements that allow for recruitment of a few specialists 

from around the world on special contracts with clear counterpart arrangements for 

capacity building and skills transfer, as people with skills required to effectively 

operationalize a PPP Unit in Malawi may not be easy to find. 



Final Report 

In our view establishing the PPP Unit as a statutory organization would offer more flexibility in 

terms of remuneration as well as the force of law required for effective operations of public 

private partnerships. We say this with the caveat that some international PPP Units have been 

very successful with civil servant staffing, though in those countries the civil servant salary 

levels are significantly higher than those of Malawi. 

In the Annex to this report, we have provided detailed budgets for Phase II and Phase III PPP 

Units. No budget is provided for the Phase I interim arrangements, because the cost sharing 

arrangements with the Privatisation Commission will be something in which we will not be 

involved. The negotiations regarding such cost sharing, and where the money will come from 

to pay for things the PC is not willing to cover in taking on PPP activities, is at this time unclear. 



Final Report 

VI. 

ROAD MAP FOR PPP PROGRAM IMPLEMENTATION 

In the preceding sections, we have provided details of our recommendations for the Policy, 

Legal, and Institutional framework for the PPP Program. In this final section, we propose a 

step-by-step Road Map for implementation of the PPP Program. This Road Map assumes 

implementation of Phase I, II, and III of PPP Unit development, as proposed in this report. 

As summarized in the Executive Summary of this report, we propose that the following steps be 

utilized for mobilizing and implementing the National PPP Program: 

‣ Conduct Phase I PPP Activity in Privatisation Commission 

‣ Prepare PPP Standards & Procedures Manuals for PPP Unit and PPP Nodes 

‣ Prepare Standard PPP Procurement Documents & Model Contracts 

‣ Key Ministries Sponsor Cabinet Paper on PPP 

‣ Enact and Publish an Official National PPP Policy 

‣ Conduct Stakeholder Consultation on PPP Policy 

‣ Finalize and Enact PPP Regulations 

‣ Finalize Institutional & Reporting Relationships 

‣ Select and Create Legal Structure for PPP Unit 

‣ Transfer Selected PC Staff to PPP Unit and Recruit for Gaps 

‣ Commence PPP Unit Operations and Build Capacity in PPP Nodes 

‣ Phase II Unit Builds Deal Flow for Transition to Phase III Unit 

‣ When Deal Pipeline is Sufficient Establish Phase III Unit 

VI.A. Conduct Phase I PPP Activity in Privatisation Commission 

It would take at least 6 months, and quite possibly as long as 12 months or even more, to 

mobilize a stand-alone PPP program. Then at the end of that arduous journey we would find 

ourselves with a PPP Unit starved for deal flow. In the PC, we have an institution that already 

has empowering laws and regulations in place, a mandate to do concessions that can easily be 

applied to PPP (at least for existing facilities, and possibly for new facilities if the interpretation 

of the mandate is stretched a bit), and a professional staff with years of experience in doing the 

kinds of things required to do for PPP transactions. Given that the skills and experience needed 

to conduct PPP transactions are similar to those required to do PPP transactions, the logical first 

venue for the PPP program is the Privatisation Commission. 

During this interim phase, while PPP transactions are being conducted in the PC by personnel 

specifically identified as responsible for PPP activity, and provided with assurance of transfer to 

the PPP Unit when formed (so they can focus on PPP instead of job hunting), the personnel who 

are assigned to PPP will be building a pipeline of future deal flow for the PPP Unit, conducting 

public awareness activities, and facilitating a targeted PPP capacity building program. 

Also during this interim phase, consultants will be busy preparing PPP Standards & Guidelines 

in the form of Operations Guidelines Manuals for the PPP Unit and the PPP Nodes, as well as 

preparing Standard Procurement Documents and Model Contracts. 



Final Report 

Government will be busy enacting and publishing a national PPP Policy, drafting and passing 

new PPP Regulations under the Public Finance Management Act, and setting up the legal and 

institutional framework for the PPP Unit. We strongly advise that Government also undertake 

development of the Regulatory Framework, which will be essential for private investment. 

VI.B. Prepare PPP Standards & Procedures Manuals for PPP Unit and PPP 

Nodes 

As mentioned in the section above, a key activity during Phase I will be the preparation of PPP 

Standards and Procedures, which should be issued as “Operations Guidelines Manuals” for the 

PPP Unit and PPP Nodes. The legal hierarchy of the PPP Program will be: 

‣ National PPP Policy 

‣ Public Finance Management Act 

‣ PPP Regulations (under PFMA) 

‣ Operations Guidelines Manuals 

The Operations Guidelines Manual (OGM) thus comes under the authority of the PPP 

Regulations, which in turn come under the authority of the PFMA, which in turn comes under 

the authority of the PPP Policy. It is in the Policy that interpretation of PFMA’s requirement 

that Accounting Officers must not only account for the public funds that have been entrusted to 

their organization, but must also ensure that said funds are used in an “efficient and effective” 

manner, is extended to mean Accounting Officers must consider PPP as one of the options for 

developing new projects. In application, this means that Treasury will approve no new use of 

public funds unless the Accounting Officer demonstrates that he/she has performed a thorough 

analysis of PPP as an option for leveraging public funds with private investment. 

At this point, our Accounting Officer colleagues are thinking “ok, but how do I do that?” The 

answer is “refer to page __ in your OGM.” The Operations Guidelines Manual thus provides 

not only guidance on how to do PPP; it also provides guidance on how to comply with the law. 

Preparing an OGM takes a long time and a lot of hard work. The manuals are highly detailed 

and have to be harmonized with the PPP legislation, which means there are sections that have 

to explain how the procedures described not only enable the successful implementation of PPP 

transactions, but also how the procedures relate to the PPP Regulations. If a new PPP Act is to 

be passed at some point in the future, we will have to hire consultants to come in for another 

round of revising the OGM so that is harmonized with, and shows how the various sections tie 

to the PPP Act. We’ll have to hire a lot of lawyers too, to harmonize all the existing legislation 

with the provisions of the new PPP Act. Otherwise, we’ll end up with an Act that says one can 

or must do something, and another act that says one cannot do such a thing. Problems such as 

this are the norm, which is one reason why we recommended starting the PPP program with a 

set of Regulations that already have a law for which such harmonization has been achieved. 

After the OGM for the PPP Unit, and the OGM for the PPP Nodes, are completed then we will 

have to distribute them and provide training on how to use them, and capacity building on how 

to do the things described in the manuals. The preparation, distribution, training, and capacity 

building activities associated with the OGM will take a full year to complete. 



Final Report 

VI.C. Prepare Standard PPP Procurement Documents & Model Contracts 

The regulatory framework in Malawi is not fully developed, and until it is it will be necessary to 

use the “regulate by contract” methodology for PPP activity. In order for private operators and 

investors to feel comfortable about investing in Malawi, contracts that are executed with them 

must be overseen by financially and politically independent regulators. Until such political and 

financial independence can be attained, the contracts themselves will have to include provisions 

that protect the parties, provisions that would not need to be in the contracts if the regulatory 

framework was already fully developed. 

While we continue to be impressed with the skills of Government officials in the Ministry 

departments that presently serve as sector regulators, and in the relatively newly-formed 

independent regulators, until regulation becomes independent of undue political influence, 

including political influence in the appointment and removal of Commissioners in regulatory 

bodies, and reliance on Government budgetary resources is ended or at least substantially 

reduced, the protections that such an independent regulatory regime would provide will have 

to be inserted into PPP contracts. 

Such contracts will serve to alleviate investor concerns by providing very specific remedies for 

contractual disputes, very specific definitions of the rights and obligations of the parties to the 

contracts, and very clear allocation of the risks of the project amongst the parties to the 

contracts. Having said this, one must note that the use of Model Contracts to “fill the gap” 

while regulatory structures are developed represents a very inexact science. No matter how 

much effort is put into the drafting of a Model Contract, in applying those Contracts to actual 

transactions there will always be things that were not anticipated and therefore not covered in 

the contract, and there will nearly always be differences of opinion when clauses are enforced. 

The development of Model Contracts is an immediate Action Item and a consultancy should be 

engaged as soon as possible to develop those contracts, as well as Standards and Guidelines for 

PPP, which should be published as Operations Guidelines Manuals for both the PPP Unit and 

the PPP Nodes. The Model Contracts should be accompanied by Standard PPP Procurement 

documents, at least Request for Qualification and Request for Proposal documents, which in 

combination with the Model Contracts will provide a full set of Procurement materials for use 

by the PPP Unit, the PPP Nodes, and other PPP stakeholders. 

VI.D. Key Ministries Sponsor Cabinet Paper on PPP 

In 2006 the IP3 consultancy drafted a Cabinet Paper for the Minister of Finance and the Minister 

of Industry, Trade, and Private Sector Development to consider presenting to Cabinet in order 

to formalize Government’s support for a national PPP Program. To date, the Paper has yet to be 

presented to Cabinet, so there is still time to modify it so that it includes the draft PPP Policy 

material provided in this report. The presentation of such a Paper needs to be as soon as can be 

realistically achieved, because everything in the PPP program flows from the PPP Policy. The 

key ministries to sponsor the Paper should include the Ministry of Finance and the Ministry of 



Final Report 

Industry, Trade, and Private Sector Development, but one or more other ministries might be 

interested in sponsoring the Paper, such as the Ministry of Economic Planning & Development. 

VI.E. Enact and Publish an Official National PPP Policy 

The official National Policy is the signal to all stakeholders that Government is committed to 

PPP as a development paradigm. The National PPP Policy should be provided in the format 

used for other official policy statements, such as the ones for transport and water, and the one 

being prepared for PPP in the health sector. In this report, we have provided the full text of 

such an official policy statement. Once the policy is agreed by Government, it should be vetted 

in a stakeholder consensus building workshop, and all stakeholders in the PPP program should 

be invited to attend, including those from the private sector. 

The transport sector national policy recently went through a similar process, and the comments 

received from stakeholders were very useful to the process of finalizing the policy. Such will be 

the case with the National PPP Policy as well, because stakeholder inputs are highly useful in 

ensuring that the policy can be implemented in a practical and effective manner, achieving the 

results for which the policy was formulated. After the PPP Policy is enacted and published, it 

will be necessary to conduct stakeholder awareness activities. 

VI.F. Conduct Stakeholder Consultation on PPP Policy 

Although the first round of stakeholder consultation is done while Government is finalizing the 

Policy, after the Policy is enacted and published it is essential to hold a series of Stakeholder 

Consultation events to inform stakeholders of the new Policy, to explain how the PPP Program 

works, to highlight the benefits of the Program, and to clarify what the Policy means in terms of 

the rights and obligations of stakeholders. Because PPP is a new way of doing business for the 

Government, it will be essential to provide detailed guidance to civil servants on how they are 

required to adjust and/or undertake activities involving contracting with the private sector. 

PPP Information Dissemination is something that must be done concurrently with the rollout of 

the National PPP Program. The PC can do this, as an interim measure, and the entity taking the 

lead can be the PC’s Public Relations and Information, Education and Communications 

Officer/Department. The process should initially be focused on dispelling any misconceptions 

stakeholders might have about PPP. For privatization, this meant explaining why privatization 

was not “giving away the crown jewels” or “laying off poor workers generate profits for rich 

investors” or “giving away control of vital national assets to foreigners.” For PPP, this will 

mean explaining why PPP is not privatization, why PPP is not just another procurement 

mechanism, why PPP creates new jobs, how PPP will accelerate the development of 

infrastructure, and how PPP benefits consumers. 

VI.G. Finalize and Enact PPP Regulations 

Although the Public Finance Management Act specifically authorizes the Minister responsible 

for Finance to issue Regulations pursuant to the Act, as a practical matter ministers usually seek 

consensus in Cabinet and Parliament before issuing such regulations. So there is a political 



Final Report 

consensus-building process that we will have to go through, as well as the usual consultations 

regarding technical and legal content, before the Regulations are passed. 

In the Annex to this report, we have provided draft PPP Regulations. Although they were 

designed to go under a new PPP Act, we have been careful to ensure that the language and PPP 

procedures specified can be accommodated under the PFMA. 

IP3 has been involved in the review and drafting of such PPP Regulations in several countries, 

including South Africa, and will be pleased to provide assistance if requested. 

VI.H. Select and Create Legal Structure for PPP Unit 

The fundamental issue regarding legal structure is whether the Unit should be a Government 

body, attached to or contained within a Ministry or other Governmental organization, or if it 

should be a semi-autonomous body such as a Commission or Executive Agency. 

The argument for having the Unit be part of a Government body, probably in this case a Unit in 

the Ministry of Finance, is that institutional structures and reporting relationships are already in 

place for the Unit if it is simply inserted into an existing Government ministry. The arguments 

against this option include: (a) setting up the Unit within a particular ministry might cause the 

other ministers to feel as if they have not been sufficiently enfranchised by the PPP program; (b) 

other ministers might feel as if this act had given too much power to the Minister of Finance; (c) 

personnel in the Unit would be civil service personnel, and they might not have the technical 

skills to do PPP project development and evaluation; and (d) there is no need to set up any form 

of semi-autonomous body because no such body is really autonomous, i.e. everyone will know 

the Unit is a de facto arm of the Ministry of Finance so why pretend otherwise? 

The arguments for having the Unit be a semi-autonomous body are: (a) it will be able to offer 

compensation packages that are competitive with the private sector, and will therefore be able 

to attract higher-quality personnel than it could with civil service compensation packages; (b) a 

degree of financial and political independence could provide a level of comfort that their deals 

are being handled on the basis of technical factors rather than political factors; and (c) a semiautonomous 

body can provide continuity while senior government officials come and go. 

The main arguments against setting up the PPP Unit as a semi-autonomous body are: (a) some 

successful PPP Units are in government ministries and employ civil servants; (b) there is a pool 

of skilled civil servants who would likely be attracted to joining a PPP Unit even though it was 

only able to offer civil service compensation packages; (c) the political backing for such a semiautonomous 

body might not be as apparent as it would be in a ministry or directly with the 

Office of the President and Cabinet; and (d) everyone will assume that the Unit functions as an 

arm of the Ministry of Finance, so why pretend otherwise? 

We find the arguments in favor of setting up the PPP Unit as a semi-autonomous body to be 

more persuasive than the arguments in favor of setting it up within a ministry. 



Final Report 

Location of the PPP Unit 

The Privatisation Commission was set up during the tenure of an administration that was more 

tolerant of the division of Government between Lilongwe and Blantyre than the administration 

is today. With the current policy of consolidating Government activities in Lilongwe, there is a 

strong argument in favor of setting up the PPP Unit in Lilongwe. The main reason the PC was 

set up in Blantyre was they were tasked with privatizing Public Enterprises, and headquarters 

of some of the largest Public Enterprises are in Blantyre. 

The PPP Unit will not be doing much business with Public Enterprises though the PPP program 

in its interim (Phase I) stage will be doing concessions with them until they are sold off, so there 

is another good reason to start the PPP program within the Privatisation Commission. By the 

time we are ready to formally establish the PPP Unit (Phase II) the expectation is that most if not 

all of the Public Enterprises will have already been privatized, so proximity to the Ministry of 

Finance will be the key factor in terms of location. 

The location question that now arises is “does proximity mean inside the ministry or down the 

road from the ministry?” Given some of the resentment we have heard toward the PC, that it is 

an elite group of people who are not sufficiently accountable to Government, that they are too 

highly paid, that they think they are better or smarter than us civil servants, etc.” we do have a 

concern about the image being housed outside of the ministry might create for the PPP Unit. A 

constraint in terms of available office space within the ministry might exist, but a new wing has 

been recently built and there might be space that could be made available. Being close to the 

ministry officials, in particular the Minister might have some practical value. But we thing that 

if the Unit is to be established as a semi-autonomous body its physical location should reflect 

that degree of independence. So we recommend the “down the road” option. 

Ministry of Finance Risk Management Unit 

In this report, we have discussed a Project Development Facility and a Risk Management Unit, 

but we have not included any detailed designs, budgets, or implementation plans for those 

entities because it is not in our Scope of Work. We would be pleased to design an institutional 

development plan for these entities if asked to do so as a follow-on consultancy. For now, we 

simply provide references to those entities and an indication of their potential roles. 

There is not presently a Risk Management Unit in Ministry of Finance, only a Debt Management 

Office, but this consultancy has recommended that, as part of the National PPP Program, a Risk 

Management Unit (RMU) be established and funded by the National PPP Program, so that the 

MoF will have the resources necessary to make assessments of any contingent liabilities 

associated with PPP transactions. During Phase I such an entity might also provide similar 

assessments for Privatization transactions, but that would require funding support from the 

privatization program. Such a Unit does not have to start out as a formal unit; it could begin as 

simply one or two people who have the necessary skills, assigned to the Debt Management 

Office. If people with such skills are not available in the civil service system, a resident advisor 

could be engaged to perform the work and transfer skills to civil servant counterparts. 



Final Report 

The function of the Risk Management Unit is to assess the relative level of risks associated with 

contingent liabilities in PPP contracts. With that assessment comes a recommendation as to 

what sort of reserve the Treasury should record, against which an offsetting expense entry 

would be made in the event that an adverse event caused the risk to become a direct liability. 

An example of a contingent liability would be a Government guarantee to cover the shortfall on 

debt service coverage in the event that the level of passenger traffic on a new railway project is 

less than projected. Another example would be a guarantee by Ministry of Finance to cover the 

shortfall in off-take contract payments by a water utility in the event that the utility’s revenues 

were inadequate to cover its take-or-pay contractual obligations because consumers were slow 

to pay their bills. These are both examples of contingent liabilities, which should be managed by 

the Risk Management Unit, as opposed to the direct liabilities that are managed by the Debt 

Management Office. 

Because a Risk Management Unit is tasked with appraising the risk of having to pay in the 

event that a contingent liability becomes a liability for payment, due to a risk event having 

taken place, such a Unit requires highly technical skills in the field of risk assessment that are 

not present in MoF today. Those skills will be needed for the National PPP Program, so the 

establishing and funding for such a unit needs to be included in the National PPP Program. In 

conducting its project appraisal activities, the PPP Unit will liaise with the Risk Management 

Unit before making decisions regarding Approval Levels for authorizing RFQ, RFP, and 

Contracting activities for projects that have been proposed by Project Sponsors (government 

agencies proposing projects). 

VI.I. 

Finalize Institutional and Reporting Relationships 

The role of the National PPP Unit in the National PPP Program is pivotal. Without such a Unit 

there will be no central coordinating body for implementing the Program, or ensuring quality 

control and adherence to best practices. The PPP Unit is also of critical importance because it 

provides centralized guidance regarding the identification and development of PPP projects. It 

also disseminates information on PPP projects, a key function for all stakeholders, especially 

prospective private sector operators/investors who are from other countries and need “single 

window” access to the Malawi PPP Program. Capacity building will be another important 

activity of the Unit, along with standardization of forms and procedures for implementing PPP 

projects. Such standardization is critical to achieving success in the objective of maintaining 

fairness, transparency, competition, and accountability in the selection process. The PPP Unit 

also provides a critical function in the area of contract management, through its Contract 

Monitoring and Compliance Division. This Division serves as the “watchdog” for the 

Regulator, which would otherwise be hard pressed to monitor each PPP contract. 

As the PPP Institutional Framework is developed, we will need to be very attentive to what the 

relationship of the PPP Unit will be with the regulators. There are multiple parties involved in a 

regulation by contract regime, as follows: 

• The public sector partner to the transaction, which monitors its partner’s compliance; 

• The private partner to the transaction, which monitors its partner’s compliance; 

• The PPP Unit Contract Monitoring and Compliance function group; and 



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• The Regulators. 

As the regulatory regime is developed, and regulation by contract is used as an interim step, the 

relationships between these four stakeholders in PPP contracting will need to be clearly defined 

to avoid duplication of efforts, to allocate responsibilities in accordance with the capacities of 

the stakeholders, to define how decisions will be made, and to define which organizations will 

be tasked with enforcing those decisions. 

This is not an easy task. Consider, for example, the two Governmental bodies tasked with the 

monitoring of Public Enterprise performance. Initial confusion as to what kind of monitoring 

one would do vis-à-vis the other, an accord was reached that one would focus on management 

and policy decisions, while the other would focus on financial performance. The problem is 

that even those two clearly delineated areas sometimes overlap. So some degree of uncertainty 

continues and that undermines the ability of each body to accomplish its intended mission. 

In performing providing monitoring and compliance activities for PPP contracts, one has to 

consider resource constraints. Neither the PPP Unit nor the sector regulator are going to have 

the human, physical, and financial resources to monitor every little activity that is addressed in 

the PPP contract. Normally, such day-to-day detailed monitoring is left to the parties to the 

contract, each of which has a vested interest in seeing that the other party is in compliance, and 

each of which has the available “on-the-ground” resources to watch what the other does. But 

what if the public sector partner is not an operating company? 

To cite a recent example from Kenya: the railways SOE was devolved into a sector regulator at 

the time a concession agreement was signed with a private operator. When the IP3 team heard 

rumors about problems in this PPP transaction, we visited with the regulator and asked them if 

it was true that the operator was not adhering to its agreed investment program, and if the train 

speeds were indeed decreasing, and if so why? The answer was basically “we’re not sure.” We 

then visited the operator, and they explained that the investment program was a 5-year plan, 

and that they had temporarily reduced train speed to reduce derailments caused by the poor 

condition of the tracks when they were given to them by Government to manage. They have 

been making repairs to the tracks and now train speeds are increasing. 

If a railway operating company SOE were the public partner to the PPP contract, they would 

have known right away the answers to our questions. But the SOE operator has been changed 

into a (much smaller) regulator with only a few staff. They do not have the capacity to check on 

day-to-day details regarding operator performance. 

As long as there are Public Enterprises that serve as operators, this problem does not exist, but 

as those enterprises are sold off contracts with private operators will be directly with Ministries. 

A Ministry doesn’t have the resources to check every little thing an operator does. And neither 

does the PPP Unit or the sector regulator, if separate from the Ministry. So who is going to keep 

an eye on the operators to make sure they do what they’re obligated to do under the contract? 

Part of the answer is that in the process of developing the PPP Regulatory Framework, we will 

make decisions about how institutions involved in the PPP contract monitoring and compliance 

process will divide up their responsibilities, so as to avoid duplication and confusion. In our 



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opinion, such activities on the part of the PPP Unit must be strictly limited to periodic checking 

of the performance factors that directly relate to Value for Money and Risk Allocation, taking 

care to watch for deterioration in areas impacting contingent liability risks. 

So that’s what the PPP Unit’s Contract Monitoring and Compliance functional group will do. 

Now who will do the rest? Those are questions that will have to be answered as the Regulatory 

Framework is developed and ultimately the best solution is a fully developed regulatory regime 

that provides economic incentives and disincentives that make detailed, ongoing, day-to-day 

monitoring of operator performance unnecessary because in such a regulatory framework the 

market forces will push operators toward compliance. 

VI.J. Transfer Selected PC Staff to PPP Unit and Recruit for Gaps 

This process will have been made a little less complicated by having designated in advance that 

the PC personnel assigned to the PPP program will automatically transfer to the PPP Unit when 

formed. We will need to ensure that the job descriptions and compensation packages for those 

personnel for the PPP Unit are harmonized with the same documents in the PC. Recruiting for 

any additional personnel required by the new PPP Unit can be conducted using the Position 

Descriptions provided in the Annex to this report. 

The recruiting process can take a long time, so it will be necessary to advertise and begin the 

interviewing process at least 3 months before the Unit is scheduled to mobilize. The selection 

process must obviously be competitive, with no exceptions. If Government accepts our advice 

to set up the PPP Unit as a semi-autonomous body outside of the civil service system, then the 

recruiting exercise must anticipate a robust response from the private sector. This is desirable, 

but will add to the number of candidates likely to be submitting applications. 

VI.K. Commence PPP Unit Operations and Build Capacity in PPP Nodes 

Concurrently with the commencement of PPP Unit operations, it is essential to mobilize a PPP 

capacity building program, somewhat for PPP Unit personnel but more importantly for all the 

other stakeholders in the PPP program. An immediate need will exist for the PPP Nodes in the 

line ministries and local government units. 

Training and capacity building are critical components of the National PPP Program because 

the skills required to do PPP are very different than the skills required to do traditional 

procurement. In traditional procurement, Government does the engineering design and then 

selects a provider that will build the facility, or provide the goods or services, at the lowest 

price. In PPP, the basic engineering design parameters are defined by Government, along with 

the Output Specifications, and the private operator does the detailed engineering design. 

Private sector innovation is very actively encouraged by allowing bidders to propose their own 

technological preferences, so long as the Output Specifications are complied with in their 

proposed design. This means the officials reviewing proposals do not need to be engineers, as 

they did in traditional procurement. Rather, they need to understand the commercial or quasicommercial 

dynamics of Service Delivery. The Output Specifications relate to Service Delivery, 

the cornerstone of PPP, and provide a quality assurance mechanism. 



Final Report 

A great deal of training and capacity building is required to convert government officials, who 

understand engineering and lowest-price procurement, into officials who are Service Delivery 

oriented. Being Service Delivery oriented means two important things: (1) the project must be 

“market driven,” meaning that consumer demand, affordability, and willingness to pay are key 

project appraisal factors; and (2) the focus of project appraisal is not on the Facilities, but rather 

on the Outputs of those Facilities. The “market driven” factor is especially foreign to officials of 

governments in countries where government has traditionally played a pivotal role in most of 

the key sectors, and has extensively intervened in economic activities. Such interventions 

characterize the governments of most emerging economies, including Malawi. 

Below, we have provided framework for capacity building. The curricula need to be 

incorporated into a training program for all key stakeholder ministries and departments, as well 

as regional and local level bodies. This training should be mobilized concurrently with 

mobilization of the National PPP Program, with an initial emphasis on PPP Nodes, and 

continued until there is enough capacity for the Program to operate without being constrained 

by a shortage of skills. 

PPP Professional Certification Program 

Included in the capacity building for PPP should be a professional certification program for 

managers and senior level officials. Government personnel policies and manuals, along with 

individual job descriptions, should provide a role for such certification to play in the process of 

selecting personnel and promoting them to higher-level positions. 

The components of such a certification program could be as follows: 

Forms of PPP and where they are being used within the region and around the world; 

Processes to identify PPP opportunities and the key elements that go into a PPP analysis; 

Elements to effectively structure the financing for PPP arrangements and put your new 

knowledge to the test in a financial modeling simulation exercise; 

How PPPs can be designed so that they stimulate the development of the local private 

sector and encourage local participation; 

Develop skills to effectively manage (and communicate with) the stakeholders to a PPP, 

including customers, the media, and labor unions; 

Learn about the Indian PPP regulatory framework; 

Institutional reviews and case studies; and 

Detailed and personalized strategic Action Plan 

Course Module Topics 



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Module I: 

PPP Concepts, Rationale, and Contractual Options 

 

 

 

Overview of the forms of PPP 

The global experience with PPP and SADC examples 

New variations on PPP, including output-based aid 

Module II: 

Project Appraisal and Feasibility Studies 

 

 

 

 

 

Objectives and key elements of feasibility studies 

The 'value for money' and 'public sector comparator' concepts 

Criteria for screening projects 

Managing and allocating risks in PPP 

Engaging consultants to assist with the PPP process 

Module III: 

Project Finance and Investment Analysis 

 

 

 

Options for financing PPPs 

The rationale for a project finance approach 

The challenges of project finance for PPP, including currency devaluation, the 

need for guarantees, and special considerations for donor-financed projects 

Module IV: 

The Procurement Process 

The various forms of procurement including competitive bidding, competitive 

negotiations, and sole sourcing 

Methods for structuring bid evaluation criteria 

Maximizing transparency in the procurement process 

Module V: 

Communications and Stakeholder Relations 

 

 

 

Methods for managing stakeholder relations 

Structuring a communications program 

Addressing the human resources and labor relations implications of PPP 

Module VI: 

Contract Management, Monitoring and Evaluation 

 

 

 

Using the PPP contract as a regulatory instrument 

Establishing an independent regulatory framework for PPP 

The forms of economic regulation, including price cap & rate-of-return 



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Monitoring contractors' performance through Key Performance Indicators 

VI.L. Phase II Unit Builds Deal Flow for Transition to Phase III Unit 

Building a “pipeline of deal flow” is investment-banking terminology that is equally applicable 

to PPP Units. At the macro level, it makes no sense to invest a lot of Government and donor 

money into a new PPP framework and Unit if there is not going to be a good stream of PPP 

transactions to provide Value for Money for the funds they have invested. At the micro level, a 

highly-skilled PPP Unit team will have nothing to do if there aren’t any transactions. 

So let’s think for a moment about where PPP transactions come from. Generally, PPP deals are 

more demand driven than procurement transactions, which tend to be design driven. So the 

process of conceptualizing, identifying, and prioritizing potential PPP transactions comes from 

government bodies (and private entities, in the case of unsolicited proposals – which are dealt 

with in detail by the draft PPP Act and PPP Regulations included in the Annex to this report) 

that are tasked with service delivery. Examples are a Ministry of Transport developing a plan 

to expand capacity in ports and airports, a water utility looking to expand its distribution 

network or build a new treatment plant, a Ministry of Public Works looking to build some new 

highways using a toll road approach, and a Ministry of Health looking for ways to reduce the 

overhead in its public hospitals by contracting non-medical services to the private sector. 

Note that none of the above examples includes the PPP Unit. So PPP deal flow is not only 

“demand driven,” it is “ground up” driven. The paradox is that the best PPP skills are in the 

PPP Unit, and yet most of the PPP deal flow is created by people who have the least training or 

experience in doing PPP transactions. 

In the various governmental bodies that are the source of PPP deal flow, the people involved 

are mostly civil servants, many of which have little or no experience in business and are thereby 

not familiar with the commercial dynamics that characterize PPP transactions. Their skills are 

usually in engineering and/or procurement, and those are indeed the right skills to manage the 

traditional relationship between government and the private sector, i.e. buyer and seller, known 

generally as procurement. So how do we enable these people to create PPP deal flow? 

The only answer is public awareness and capacity building. These people must be sensitized to 

the PPP program so that they will make the effort to identify PPP opportunities. Then they will 

nee conceptual training to enable them to develop PPP concepts in response to increased need 

for service delivery, and then to develop those concepts into initial PPP project designs. From 

that point, they will need capacity building to help them to prioritize their lists of potential PPP 

projects, for presentation within their government bodies, and then develop the highest ranking 

potential projects into business cases for submission to the PPP Unit. 



Final Report 

We have provided an illustrative PPP capacity building program in this report. As part of the 

training, and capacity building as both part of training and as working with PPP Unit personnel 

we again stress the need to institutionalize the knowledge base that will be build in the training 

and capacity building program by developing PPP Nodes in these government bodies. 

VI.M. When Deal Pipeline is Sufficient Establish Phase III Unit 

There are two things that might never happen in the Malawi PPP program. One is the PPP Act 

might never be passed because Government finds that the PPP program runs fine without it. 

Care must be taken that a sense of complacency does not set in regarding the PPP Act. If there 

is a need for it, because of the factors we have explained elsewhere in this report, then it has to 

be passed, even if things seem to be going well with just the PPP Regulations. 

The other thing that might never happen is establishing of the Phase III (or mature) PPP Unit. 

In a country of Malawi’s size, the deal flow might never reach a level sufficient to justify the cost 

of such a Unit. In such an event, we would simply continue with the Phase II Unit. 

The best way to view the PPP Unit, in all of its Phases, is not to envision a jump from Phase I, 

then a jump to Phase II, and then a jump to Phase III. The Unit is designed to be flexible and 

scalable, so size (and cost) is always a function of demand for its services. In matters of public 

policy and administration, it is usually best to take a gradual transition approach rather than a 

radical shift in direction approach. That is why the design presented in this report envisions a 

gradual transition from privatization to PPP, rather than an abrupt cutting off of support for 

Privatization to pursue a PPP program, and a relatively long interim role for the PC during the 

transition process. The move from PC to MOF doesn’t have to be done in a hurry, nor does the 

move from a Phase II Unit to a Phase III Unit. Let things evolve naturally, and take the time to 

do things right, so that a firm foundation can be put in place for the future. 

And remember that PPP is not the magic pill to cure all ills. It’s complicated, and it requires a 

fundamental shift in the way government goes about delivering services to its constituents. It is 

extremely important not to allow unrealistic expectations to develop regarding PPP. The road 

to success in PPP is long, winding, and filled with unexpected challenges to overcome. But we 

must travel the road, carefully, because if we are to come anywhere near to meeting the ever 

rising demand for public services, especially infrastructure, there simply is no other option than 

to engage the private sector, and then try our best to make that marriage work. 

VI.N. Timeline for Implementation of the National PPP Program 

The two charts provided in the following pages provide an estimated timeline for implementing 

the National PPP Program. Because Phase III (mature PPP Unit) begins when Phase II ends, it is 

only necessary to present timeline charts for Phase I and Phase II. The timeline allows 1 year to 

mobilize the Phase II Unit. This is considered achievable but a little optimistic. We thought it 

advisable to present a slightly optimistic timeframe, but it could “slip” by 6 to 12 months. 

In implementing the Program, it is important to avoid “sequencing” as much as possible, i.e. to 

avoid having to wait for one component to be in place before working on the other component. 



Final Report 

For example, there are many activities that can be undertaken before the PPP Regulations have 

been formally promulgated. On the regulatory front, once the relationships between the PPP 

Unit and regulators are defined, it is not necessary to wait for the regulatory regime to be fully 

developed in order to attract private investment. Model contracts, the basic (not yet tailored to 

Malawi) versions of which are available, can be used to provide immediate guidance for PPP 

transactions until versions adapted specifically to Malawi can be developed. Implementation of 

the National PPP Program should, therefore, be achieved via a simultaneous “multiple parallel 

path” approach rather than the traditional government “sequential” path. 



Final Report 



Final Report 

Annex A. 

LEGAL FRAMEWORK 

Introduction 

Governments have the difficult task of trying to meet the diverse and continually 

changing needs of their citizens. As if this was not difficult enough, citizen expectations 

continue to grow. Increasingly, they are routinely demanding more and better 

government services at lower costs. Governments are being challenged to deliver 

existing social services faster and cheaper besides being expected to deliver additional 

services. 

The ability of governments to meet these ever-growing expectations of their citizenry is 

constrained by the resource envelope. Conventional financing mechanisms tend to kill 

most infrastructural projects in developing countries given the limited markets. A cash 

flow analysis will generally reveal that projects financed under a traditional private 

investment scenario, will not be financially feasible. 

The PPP Financing Model 

There are many today who will argue that governments should hand over their 

activities to the private sector, which will do a far more efficient job. Whilst this may be 

true to some degree, it is too simplistic an approach to address all the expectations of the 

people. We believe that the more sustainable response lies in governments taking on a 

larger role than was traditionally expected of them. We believe that their role will 

increasingly be in collaboration with, as opposed to the previously antagonistic role 

against, the private sector. Public-private partnership will require a dialogue between 

the public and private sector on what needs to be done to promote realization of their 

joint goal. This partnership will transcend the traditional business boundaries that 

currently exist and will increasingly extend into policy areas, including education, 

health, human rights, immigration and citizenship, science and technology, foreign 

relations, arts and culture. 

As a result of this new approach, different “rules of the game” are needed which will 

enable the development of alternative financing plans. These new rules will enable 

government officials to become creative, using a multitude of methods and finance 

techniques to reduce development costs and enhance project income streams. What was 

previously the “opposition” will now become a partner and both sides will need to work 

together in order to achieve one objective – the realisation of the project. This joint effort 

will transform projects from financially infeasible to those that are acceptable to the 

capital markets. The absence of a facilitative PPP environment that allows these 

partnerships to take root could thus make the whole difference. It could make or break 

a project proposal. 

This is the backdrop to the current assignment. The Government of Malawi seeks to 

identify means of addressing the expectations of its people in terms of new social 

services such as roads, hospitals, schools, etc that cannot conceivably be financed by the 

country’s development budget. Indeed, even with the generosity of Malawi’s 

development partners, the financing gap remains huge. At any rate, Malawi’s 



Final Report 

development agenda may not necessarily always coincide with the priorities of the 

country’s development partners. Thus, there will always be projects that the people of 

Malawi consider a priority that cannot be funded the Government and its development 

partners. 

There is general agreement that whilst there is no law against PPPs in Malawi, a 

facilitative environment cannot hurt. The country currently has no policy, legislation or 

institutional framework dealing specifically with PPPs. This notwithstanding, PPPs 

mostly in the form of concessions and leases have been undertaken primarily, but not 

exclusively, under the auspices of the privatisation programme. The absence of a PPPspecific 

governing framework is not peculiar to Malawi. A number of other jurisdictions 

have held the view that so long as investments can be made profitably; there is no need 

for any specific PPP legal and institutional framework. For developed countries, this 

argument may not carry the same relevance as in poor countries. There is no disputing 

that developing countries such as Malawi where market- oriented systems are less 

developed, the private sector are reluctant to undertake PPPs when the legal and policy 

framework is absent. 

Increasingly, there are more and more people who believe that a facilitative legal 

framework for PPPs can play a pivotal role in promoting PPPs, especially if the sector 

level legislations, such as those obtaining in Malawi, do not specifically provide for 

PPPs. The PPP law typically embodies a political commitment, provides specific legal 

rights, represents an important guarantee of stability of the legal and regulatory regime 

and, most importantly, provides necessary powers to the executive. In most developing 

countries, the implementation of privately financed infrastructure projects only became 

truly established following the promulgation of PPP legislation which outlined the 

general rules under which PPP projects were to be awarded and executed. 

The PPP-specific legislation would: 

create a comprehensive framework to deal with the entire PPP project lifecycle; 

provide a direct legal basis for PPP contracts; 

provide a general framework that specifies the rights of the private sector; 

clarify the “rules of the game” for various government entities; and 

address some of the concerns of the private sector and the lenders. 

Having underscored the importance of a PPP legal and institutional framework, its role 

should not be over-played. A good law will not in itself be reason for an investor to 

make an investment in country. This is simply not the case. The starting point is that 

one must have a viable project. It is certainly helpful to the business if the environment 

boasts of a favourable legal and institutional framework. However, the point is that a 

project follows a good investment opportunity and not a good investment climate. To 

be sure, a facilitative environment could help to make a project viable. 

Important Role of PPPs in the development of Projects 

In Malawi’s economic situation, where resources for development are scarce, PPPs can 

help to provide much needed developmental capital. There are also additional benefits: 

PPPs assist in providing an avenue for quicker delivery of facilities and services; 



Final Report 

 

 

 

 

Access to funds and technologies/skills ordinarily not available to the public 

sector; 

Sharing of risks as well as cash flow/revenues; 

Creation of new tax revenues; and 

Promotion of goodwill and trust amongst public entities and their constituents. 

With all these benefits, why have PPPs taken a long time to take root in this country? As 

elsewhere, many of the objections raised against PPPs have been based on the 

misconception that PPPs are the same as privatisation. The truth is that they are not. To 

be sure, they may have been used as a form of privatisation with respect to existing 

public enterprises, but they are not the same. PPPs could be used to develop a new 

project where none existed previously and therefore nothing to privatise. Additionally, 

it has not helped that PPPs are difficult to implement in the best of environments. In a 

climate where no facilitative environment exists, implementing PPPs is especially 

difficult. Thus, the creation of an environment that is conducive for carrying out PPPs is 

helpful. Some of the characteristics that will assist to create a facilitative environment 

are: 

1. A Commitment from the Political Leadership 

A truly successful partnership between the public and private sector can result only if 

there is commitment from both the leadership in the government and private sector 

organization. This needs to go beyond mere lip service. The most senior public officials 

must be willing to be actively involved in supporting the concept of public and private 

partnerships, and take an aggressive leadership role in the development of each given 

venture. A well-informed political leader can play a critical role in minimizing 

misconceptions about the value to the public of an effectively developed partnership. In 

the context of Malawi, if PPPs are to succeed there is need to work actively not to allow 

history to repeat itself. The privatisation experience is probably an example of how not 

to implement a programme of that magnitude. There are many do believe that the 

Government has taken a lukewarm attitude towards it. This, they claim, explains the 

difficulties that the programme currently faces. 

2. Legal Framework 

Equally important is the need for a statutory foundation for the implementation of 

public and private partnerships. Too often, laws may limit or lack clarity regarding the 

formation and management of public and private sector partnerships. Without this 

clarity, the private sector leadership often view these collaborative partnerships as risky 

ventures and cannot take advantage of innovative and creative solutions. A number of 

countries have established effective statutory frameworks to foster collaborative work 

with the private sector. Unfortunately, any perception of risk, whether real or 

imaginary, tends to increase the cost of undertaking that project. This makes it 

increasingly less feasible. 

3. Direct Public Sector Involvement 

Once a partnership has been established, the public sector must remain actively 

involved in the project at all levels. Ongoing monitoring of the performance of the 

partnership is important in assuring its success. This monitoring could be done on a 



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daily, weekly, monthly, or quarterly basis for different aspects of each partnership (the 

frequency is often defined in the business plan and/or contract) from an outcome basis. 

The monitoring also helps the Government to explain to its citizens the positive 

attributes of the project in addition to ensuring that the private sector partner abides by 

agreed commitments. 

4. A Well-Crafted Plan 

Each party must know what to expect of the partnership beforehand. A carefully 

developed plan (often done with the assistance of an outside expert well conversant in 

this field) will substantially increase the probability of success of the partnership. This 

plan most often will take the form of an extensive, detailed contract, clearly describing 

the responsibilities of both the public and private partners. In addition to addressing 

areas of respective responsibilities, a good plan or contract will include a clearly defined 

method of dispute resolution as not all contingencies can be foreseen. 

5. Effective Communication with Stakeholders 

More people will be affected by a partnership than just the public officials and the 

private sector partner. Affected employees, the portions of the public receiving the 

service, the press, labour unions and relevant interest groups will all have opinions and, 

frequently, significant misconceptions about a partnership and its value to the general 

public. It is important to communicate openly and candidly with these stakeholders to 

minimize potential resistance to the establishment of the partnership. Both parties need 

to develop an effective communication plan. The communication management process 

provides a structured approach to creating and delivering effective information, 

defining audiences and delivery vehicles. The process helps ensure accurate and 

consistent messages are conveyed, by appropriate authorities through appropriate 

channels and vehicles at the right time. Successful implementation will positively affect 

the work environment and relationships with sponsoring organizations, employees and 

other stakeholders. 

6. The Right Opportunity 

Only a select number of government business problems are ripe for a true partnership. 

These should have the right characteristics – uncertainty, high complexity, challenging 

problems, etc. When forming a public-private partnership, it is critically important that 

both parties set and manage reasonable expectations, especially the government sector. 

7. The Right Partner 

The "lowest bid" is not always the best choice. The "best value" in a partner is critical in 

a long-term relationship. A candidate's experience in the specific area of partnership 

being considered is an important factor in identifying the right partner. 

8. Well-Defined Management Processes 

It is important that both public and private sector parties agree on key management 

processes early in the formation of the relationship. 

In conclusion, every effort should be made to ensure that any law providing the 

framework for PPPs should address the issues that we have covered above. 



Final Report 

Current Legal Framework Impacting on PPPs 

In order to set up an environment suitable for implementing PPPs in this country 

Malawi has over the recent past, commissioned a number consultants to design 

appropriate legal and policy framework. Utho Capital Partners were contracted to 

undertake a situational analysis of the prevailing environment in Malawi in order to 

determine what needed to be done to improve the PPP legal and institutional 

framework. Utho Capital Partners provided a comprehensive review of the operational 

environment. We have reviewed their work as well as that of PricewaterHouseCoopers. 

PWC also undertaken a similar analysis with particular emphasis on recommending 

strategies that were to benefit the pace of the privatisation programme. This report 

benefits from their respective reports. 

In addition, to the work undertaken by Utho Capital Partners and PWC we also 

collected and reviewed a number of laws, by-laws and policy documents in order to 

identify any bottlenecks that currently exist in Malawi’s legal framework that would 

make PPPs especially difficult to implement. 

1. The Constitutional Framework 

The Constitution stipulates that the Government’s paramount duty shall be to 

promote, safeguard, and advance the welfare of the people of Malawi. The 

Constitution also commits the Government to long-term investment in health, 

education, economic and social development. This has clear implications on the 

amount of investment needed to fulfil these commitments. As discussed above, 

there does not appear any reasonable likelihood that the Government can meet these 

commitments. The obligations on the part the Government are clear. Equally clear 

is the fact that pursuing private enterprise, whether by the Government or the 

private sector or in association, is not prohibited. 

ISSUE: 

Supremacy of the Constitution 

Any Act of the GoM or any law enacted that is inconsistent with the provisions of 

the Constitution shall to the extent of that inconsistency be invalid. Thus, any law 

that would seek for instance, to detract from the commitments articulated in the 

Constitution could potentially be declared invalid. This needs to be borne in mind in 

the preparation of the new PPP legislation and the amended Privatisation Law. 

2. Privatisation - Public Enterprises (Privatisation) Act 

By virtue of the Public Enterprises (Privatisation) Act, the Privatisation Commission 

is the sole authority in Malawi to implement the privatisation of any public 

enterprise. Although the privatization programme started off impressively, progress 

has slowed down. The Privatisation Commission engaged PwC to recommend 

mechanisms for increasing the pace of the programme. PwC’s final report, delivered 

in June, 2004, contained a total of 291 recommendations covering all aspects of the 

privatisation programme and some touching on other areas of Malawi’s economic 

landscape. Overall, the recommendations sought to create an environment that 



Final Report 

would be conducive to the smooth carrying out of the privatisation programme. 

Some of those recommendations propose improvements to the Privatisation Law. 

ISSUE: 

Adequacy of the Privatisation Legal Framework 

Work is underway that seeks to amend the Privatisation Legal Framework. The 

advisers have drawn up a Bill which incorporates PPPs as one of the 

privatisation methods. This is at an advanced stage. In addition, the advisers 

handling this assignment have produced a Draft Privatisation Policy Document, 

Draft Privatisation Bill, Draft Privatisation Regulations, and Draft Privatisation 

Implementation Manual. All these provide for PPPs within the general 

framework of the Privatisation Programme. Whether the country requires to 

develop a totally new legal framework or merely build on the strength of existing 

legal frameworks is a matter that seems to have been settled. The proposal to go 

ahead with a bridging arrangement that entailed building on the capacity 

already present at the PC had been premised on the wish to move with speed. 

Holding other factors constant, the majority opinion favoured the development 

of a completely new legal framework. There are several advantages for this 

approach. The legislation would: 

 

 

 

 

 

create a comprehensive framework to deal with the entire PPP project 

lifecycle; 

provide a direct legal basis for PPP contracts; 

provide a general framework that specifies the rights of the private sector; 

clarify the “rules of the game” for various government entities; and 

address some of the concerns of the private sector and the lenders. 

The draft Privatisation Bill and other ancillary documentation whilst referring to PPPs 

are not adequately comprehensive to supplant the need for a new PPP umbrella 

legislation. PPP-specific legislation will cover various critical aspects of the PPP 

transaction including authorising the public authority to award PPP projects and 

providing a uniform treatment to issues that are common to PPP projects, such as: 

1. Describe the form and extent of PPP in infrastructure projects; 

2. Define a process for selecting projects that can be offered to the 

private sector; 

3. Provide guidelines on project preparation so that technically 

feasible and financial viable projects are prepared; 

4. Specify the selection process, and criteria, ensuring that the process 

is fair, objective, transparent and time bound; 

5. Propose an approach for dealing with un-solicited proposals and 

direct negotiations for selection of the private sector; 

6. Provide an indicative risk-sharing framework, so that risks are 

allocated to the party best positioned to influence the factors 

affecting the risk and ensuring the interest of all stakeholders is 

safeguarded; 



Final Report 

7. Specify adequate levels of government support to PPP projects; 

8. Propose an approach for conciliation or, if necessary, dispute 

resolution; and 

9. Institute an agency which will coordinate PPP transactions and 

assume charge of sectors that are not assigned to specific line 

ministries. 

The legislation will also specify that: 

1. All bid documents be prepared in line with the provisions of the PPP 

legislation, sector policy and model concession agreements. On its part, 

the Government will provide incentives which will assist the private 

sector in the preparation of the project documentation; 

2. The bid documents shall include project studies undertaken by the 

Government, draft concession agreements and offer of Government 

support; 

3. The notice inviting participation will be adequately publicised, so 

as to attract all possible investors; 

4. The bid process would be designed to assess the Developer’s 

technical, commercial (if required), managerial and financial 

capabilities; 

5. All proposals will be evaluated on a common platform to the extent 

possible; 

6. The Directorate of Public Procurement or other competent 

authority shall certify that the bidding process has been in line with 

the provisions of this Act, the Sector Policy and the Model 

Concession Agreement, if the same has been formulated; 

7. Revenue objectives of the Government shall be of secondary 

importance in determining the selection criteria, and minimising 

user costs will always be of primary importance; 

8. For developer selection through competitive bidding in BOOT, 

BOT, BOO projects, the Government shall use one or a combination 

of more than one of the following criteria: 

• Lowest bid in terms of the present value of user fees; 

• Highest revenue share to the Government; 

• Highest up-front fee; 

• Shortest concession period; 

• Lowest present value of the subsidy; 

• Lowest capital cost and operational and maintenance cost 

for projects having a definite scope; 

• Highest equity premium; and 

• Quantum of State Support solicited. 



Final Report 

9. For BT, BLT, BTL, service contracts and management contracts that 

selection criteria used will be the lowest NPV of payments from the 

Government; 

10. In case of limited response to the competitive bidding process, the 

PPP unit can recommend that all subsequent procurement for the 

project is through competitive bidding and re-negotiate the 

commercial and/or financial offer based on the project cost 

determined after the competitively bid procurement process or 

reject the offer and terminate the process; 

11. For bids submitted by developer consortiums, the lead consortium 

member of a pre-qualified consortium cannot be replaced. Further, 

after a consortium is selected to implement the project, the lead 

consortium member has to maintain a specified minimum equity 

stake in the special purpose vehicle for a specified period of time. 

Replacement of other consortium members may be permitted, 

provided the same is not prejudicial to the original strength of 

consortium as determined in course of the evaluation of the 

Request for Qualifications; and 

12. In ordinary circumstances, the Government will not negotiate on 

the financial/commercial offer submitted by the private sector. In 

exceptional circumstances, if negotiations are required, the reasons 

for the same will be documented and recorded. The Government 

will negotiate the financial and/or commercial offer only with the 

private sector participant submitting the most competitive 

proposal. Negotiations shall be restricted to only those conditions 

that have been enclosed as part of the bid. 

Timing and Sequencing of Requests for Approval 

The potential to have two legal instruments governing PPPs: the amended 

Privatisation Legislation and the new umbrella PPP Legislation which the 

current assignment will produce as one of its outputs could present some 

problems. It will be critical that these should be reconciled with each other. One 

option could be that the PC should take charge of PPPs that involve existing 

assets whilst the new PPP Coordinating Agency could be responsible for the rest. 

Section 29 of the revised Privatisation Law refers to new PPP regulations. These 

are yet to be prepared. It is suggested that such reference should be to the new 

PPP legislation that is to be prepared as an output of the ongoing IP3 assignment. 

Initially, the thinking was that it would take a long time for the new PPP 

umbrella law to be crafted and adopted by the authorities. It was felt then that 

amending the Privatisation law to incorporate PPPs would be an appropriate 

bridging arrangement until the PPP-specific law was introduced. This is not the 

case any more. The two exercises are now happening at about the same time. 

This should be seen as fortuitous. There is one further point that needs to be 



Final Report 

borne in mind. The party representation in the country’s Parliament is 

asymmetrically in favour of the opposition. This does present some difficulty for 

the Government sometimes in managing its business in the National Assembly. 

It is unpredictable as to how a matter before the Assembly will be resolved. 

Besides, the subject of privatisation does not enjoy much favour across both sides 

of the political divide. In the circumstances, we believe that too many 

submissions to the National Assembly could actually poison their opinion 

against this initiative. Such frequent proposals could potentially provide the 

National Assembly with the excuse to throw out a particular motion. Parliament 

might perceive the Government as adopting a “trial and error” strategy for 

developing possible solutions to the whole issue of PPPs in this country. Thus, 

we are proposing a departure from the original approach. We propose that the 

Government presents one package of reforms to the National Assembly. The 

package would comprise: 

Firstly, a new PPP-specific law through which: 

o a new implementation unit is to be set up to manage the PPPs; 

o a comprehensive framework to deal with the entire PPP project 

lifecycle would be created; 

o a direct legal basis for PPP contracts would be provided; and 

generally provide the “rules of the game” for various players; 

Secondly, a revised Privatisation Law in which the PC is empowered to 

use PPPs as a privatisation methodology. However, such PPPs would be 

undertaken in a manner that is consistent with the new PPP legislation; 


Thirdly, appropriate amendments would be effected to other crucial 

pieces of legislation to facilitate PPPs in Malawi. 

The above initiatives would need to be seen as sides of the same coin. 

3. Labour Laws - The Labour Relations Act, 1996 & the Employment Act, 2000 

Basically, the Labour Relations Act is concerned with the protection of freedom of 

association and collective bargaining. The Act also provides for dispute resolution 

machinery, tripartite Labour Advisory Council and Industrial Relations Court. The 

Employment Act on the other hand, seeks to reinforce and regulate minimum 

standards of employment and to ensure equity for enhancing industrial peace, 

accelerating economic growth and social justice. 

Case Law - The Stanbic Case: 

Employers in Malawi are currently concerned with the decision of the High 

Court in what has come to be referred to as The Stanbic Case 4 . The Minister of 

Labour, in exercise of the powers conferred by section 35 of the Employment Act, 

2000 issued the Employment Act (First Schedule ) (Amendment ) Order, 2002. 

The Order sought to revoke the First Schedule to the Employment Act, 2000 and 

4 The State and Attorney General v. Mary Khawela and Others – Misc. Civil Cause No. 7 of 2004 

(unreported) 



Final Report 

permit an employee whose services had come to an end to collect his pension 

and any additional sum by which the severance allowance exceeds the pension. 

The Stanbic staff argued that they should receive both amounts in full and 

sought redress from the courts. The High Court decided that the Minister had 

power to amend the formula for calculating severance allowance payable but not 

the eligibility criteria i.e. the Minister could not decree that an employee was no 

longer entitled to the severance allowance. Consequently, employees now can 

collect both their pension and the full severance allowance. 

ISSUES: 

This decision has made employers nervous as those who had sought to 

insure themselves by taking out pension schemes are actually being 

penalised. An appeal has been lodged with the Malawi Supreme Court but 

legal opinion does not hold out much hope on this front. Efforts are in hand 

to secure the amendment of the Act by Parliament. If this matter does not get 

resolved, employers are considering dissolving pension schemes. We feel 

that any private sector partner considering PPPs in Malawi will not feel 

particularly encouraged by the state of the law vis-à-vis severance payments. 

The Employment Act provides that upon winding up of a company, 

employees’ terminal benefits take priority over other payments. This 

however, contradicts the priority provided under the Companies Act in such 

situations. This situation needs to be corrected. 

The Employment Act demands that upon termination of employment, 

pension must be paid out within six weeks. Generally, this is a matter 

outside the control of the individual employer as most pension schemes are 

managed by third parties. The employer in such a case is not in control of the 

payment. Again, an appropriate amendment would be helpful. 

Finally, the newly found freedoms which came with the new democratic 

dispensation in 1994, brought with them new challenges. The Employment 

Act for instance, provides for procedures for conducting strikes. However, 

the majority of strikes are actually illegal. Legally established procedures 

which need to be observed before staff may proceed on strike are usually 

ignored. This needs to change to assure investors of predictability regarding 

industrial action. 

4. The Land Act, the Land Amendment Act, and the Registered Land Act and the 

Land Policy 

Firstly, we will discuss the Land Policy that was adopted by the Government a couple 

of years ago. In general, many commentators perceive the Land Policy as a deterrent 

to investment in industries with long gestation periods. The relatively short 

leasehold period of 50 years that has now replaced the conventional 99 years is at the 

centre of the growing view. Another concern is the ostensible discriminatory nature 

of the policy in relation to the treatment of nationals as opposed to non-nationals. 

In relation to the Land Laws, a number of issues come to the fore: 



Final Report 

Of the three types of land available in Malawi, customary land is by far the largest 

type. This is held by chiefs and communities without formal title to it. Although 

there is provision for converting such land to titled land, the process is long and 

laborious. 

ISSUES: 

A sizeable number of PPP projects will probably involve land. If securing 

title to such land becomes a very lengthy process, it may place a serious 

bottleneck to the realisation of those PPP projects. Additionally, even though 

the PPP project may not require title to land, investors may wish to use such 

title as security for loan capital. 

A new Section 24D stipulates that where freehold land is held by a person who is not 

a citizen of Malawi for a continuous period of more than two years and during that 

period such person has not shown his intention to develop the land, the Minister 

may demand voluntary surrender of the land within a period of ninety days. The 

new provision appears to discriminate against non-citizens. 

ISSUE: 

 

The appearance of discrimination does not auger well for investment. Such a 

law, if deemed necessary, ought to apply uniformly to all. 

Section 2(l) of the Land Act Regulations, provides that a lessee may not transfer or 

otherwise dispose of any portion of leasehold property (including mortgaging the 

land) without first obtaining written consent from GoM. Section 24A of the Land 

Act requires anyone wishing to offer for sale any private land to give 30 days written 

notice to the Minister of Lands. 

ISSUE: 

 

Stories abound of delays in the issuance by the Government of the consent (r. 

2(l) and certificate of compliance (S.24A). This would need to change to 

facilitate PPPs. 

5. Lands Acquisition Act 

Under the above Act, the Minister may compulsorily or by agreement acquire any 

land if, in his opinion, it is desirable or expedient in the interests of Malawi to do so. 

Section 10 empowers the Minister to determine the amount of fair compensation to 

be paid to the person from whom the land is being compulsorily acquired. 

ISSUE: 

 

The lack of predictability regarding amount of fair compensation and the 

level of discretion given to the Minister makes investors uneasy as the GOM 

tends to rely on the government valuation surveyors whose independence 

could be questioned. 

6. Conveyancing Act & Stamp Duties Act 



Final Report 

Stamp duty at the rate of three percent of the value of the property subject of the 

transfer or sale is payable to the Government. There is also duty, albeit a much 

reduced level, on a mortgage or charge. 

 

This is a form of tax. It could therefore very be that in trying to encourage 

investment in PPPs the Government may grant a general or specific waiver 

for this duty. 

7. Companies Act & Protected Flag, Emblems and Names Act 

PPPs can be undertaken through any myriad of vehicles, although the incorporation 

of a limited liability company under the Companies Act would be the commonest 

type. The process for securing the registration of a company in Malawi is fairly 

simple and straight-forward. If the name of the proposed company wishes to use 

the word “Malawi” or “National” or “Republic” etc, it is necessary to obtain specific 

approval from the Government – the Office of the President and Cabinet. 

ISSUE: 

 

Stamp Duty is payable on the nominal capital of the company. This can be 

costly depending of the amount of the authorised share capital. To facilitate 

PPPs and help to make new projects viable, one of the potential incentives 

could be to allow the prospective investors a waiver with regard to this 

stamp duty. 

8. Taxation Act, Customs and Excise Act 

The Tax Act provides a tax regime for any investor, be it a citizen or non-citizen or 

indeed a corporate entity. With respect to resident individuals and companies, tax is 

levied on all income from within or deemed to be within the country. In relation to 

commercial operations, the Act allows (within some limitations) the carry over of 

operating losses in the determination of taxes payable in later years. Additionally, 

the employer is required to withhold employment taxes (popularly known as “Pay 

As You Earn” or “PAYE”). 

ISSUES: 

A recent amendment of the Taxation Act (2005) attempts to limit to six years 

the ability to carry forward any tax losses. The Investment Promotion Act, on 

the other hand, suggests that tax losses can be carried forward indefinitely. 

Work is in hand that seeks to remove the discretion to grant tax waivers from 

the Minister of Finance. Any incentives for PPP projects therefore will need 

to be sanctioned by Parliament probably through the new Act. 

To enable PPP projects to be viable, it may be necessary to accord certain 

projects preferential taxation rates. The Government may wish to give this 

matter further thought. 

9. The National Transport Policy, 1998 & the Road Traffic Act 

High transport costs, weak infrastructure and poor access to rural areas remain 

important issues in the economic development of Malawi. This will prove a major 

consideration in the implementation of PPPs. It is as much an obstacle as it is an 



Final Report 

opportunity for potential PPP projects. The goal of the National Transport Policy 

therefore is to ensure the provision of a coordinated transport environment that 

fosters a safe and competitive operation of commercially viable, financially 

sustainable, and environmentally friendly transport services and enterprises. 

ISSUE: 

 

One would wish to see the provisions of the Road Traffic Act consistently 

enforced. It may help to curb the ever-increasing number of accidents on 

Malawi’s roads, which in turn, increases the cost of insurances. 

10. Communications Act 

The Communications Act deals with telecommunications, broadcasting and postal 

legislation. The Act creates an Authority whose board acts as the regulatory 

commission. 

ISSUE: 

 

The Government granted exclusivity to an operator. A subsequent Minister 

simply ignored it. There is need for consistency. The decisions of the 

Government are not divisible. They cannot be ascribed to individuals. PPP 

projects are generally long-term projects. Investors will need to be assured 

that irrespective of ministerial changes, the Government will honour its 

commitments irrespective of the individual ministers who entered into such 

arrangements. 

11. Electricity Act 

The Electricity Act establishes the Electricity Council as a corporate body for the 

purpose of regulating the generation, supply, distribution, transmission, safety and 

use of electricity within Malawi. 

ISSUES: 

Power outages are not unusual in Malawi. Yet assured electricity 

supply is critical for most industries. This is the biggest challenge for 

PPP projects. Most of the potential new PPP projects will rely on 

power to succeed. This is a bottleneck that will need to be resolved. 

The unbundling of ESCOM will generate opportunities for PPPs in 

generation, transmission and distribution of electricity. The private sector 

could generate electricity using micro hydro power plants, photovoltaic 

power plants, or other types of small power generating facilities. 

There is also the potential for a larger PPP in the area of power generation 

using coal. 

12. Immigration Act 

The Act regulates the entry of people into Malawi. A balance needs to be struck 

between the need to bring in much needed investment and the desire to keep out the 

undesirables. 



Final Report 

ISSUE: 

 

 

This Act has been criticized for allowing extremely high levels of 

governmental discretion. It is argued that such discretion could be abused. 

Additionally, a change in the legislation to provide for timeframes within 

which the Government will make decisions may be helpful. 

13. Public Procurement Act 

The Act applies to all procurement carried out by procuring entities using public 

funds. The Act established the Office of the Director of Public Procurement who is 

responsible for the regulation and monitoring of public procurement in Malawi, and 

who is accountable and reports to and operates under the general supervision of the 

President. 

ISSUES: 

No provisions exist currently governing the monitoring of performance. 

As the Act provides for the review of the procurement process, it seems only 

natural that some dispute resolution mechanism be provided for. 

There is need for the Act to refer to PPPs. 

14. Corrupt Practices Act 

The Act seeks to curb corruption in Malawi thereby advancing the welfare of the 

people of Malawi and their economic activity. 

ISSUE: 

 

The recent suspension of ACB Director suggests that the body is not as 

independent as the Nation was led to believe. The director could have been 

suspended for justifiable cause. That is however, unknown as there has been 

no official announcement for the director’s suspension. In a democracy, 

these actions fuel suspicion and this is not helpful to the creation of an 

enabling investment environment. 

15. Export Processing Zone Act 

The Export Processing Zone Act is an enabling Act intended to provide for the 

establishment, operation and administration of Export Processing Zones within 

Malawi. An EPZ is defined as an area or building declared as such by the Minister. 

ISSUE: 

 

No industry has as yet been declared a priority industry to allow such 

industry to benefit from the incentives prescribed by the Act. This has 

rendered the Act superfluous. 

16. The Export Incentives Act 

The Act provides export incentives to registered exporters and establishes a National 

Export Policy Committee. 

ISSUE: 



Final Report 

 

The Export Incentives Act and the Export Processing Zones Act could be 

merged into one Act. Both of them cover very similar matters. This is 

probably the reason for the long-talked about merger of MEPC and MIPA. 

17. Public Finance Management Act 

The purpose of the Act is to establish a system for proper management and control 

of public resources. The Act establishes principles of fiscal and financial policy 

consistent with the economic goals of the Government. 

ISSUE: 

 

Whilst the legal provisions seem well-intentioned, it is critical that oversight 

responsibility resting with the Executive and the National Assembly be 

exercised dutifully. Otherwise, the impression may be created that no one 

will be held accountable for any abuses. 

18. Water Works Act, 1995 

The Act is meant to facilitate the establishment of water boards and water areas, 

ensure proper administration of such water areas and provide for the development, 

operation and maintenance of waterworks and waterborne sewerage sanitation 

systems and all other matters which are in accord with these aspirations. All water 

utilities in Malawi are governed by this Act although previously each had its own 

establishment Act. 

ISSUE: 

 

 

The inability of a board to supply sufficient water could prove fatal for 

a PPP project. Thus, an investor is not assured of either sufficient or 

continuous water supply. This position does not bode well with 

potential investors. The Government needs to review this position 

carefully to see how best to address it, including giving special 

incentives for PPP projects in this supportive industry. 

There is a conflict between the above Act and the Local Government Act with 

respect to responsibility for distribution of clean water and management of 

waterborne sanitation services. This would need to be resolved. 

19. Investment Promotion Act 

The Investment Promotion Act encourages private investment into Malawi. For this 

purpose, it established the Malawi Investment Promotion Agency. The function of 

the Agency is to be the central facilitator of investment in Malawi. 

ISSUE: 

 

Apart from identifying investors, MIPA does has no mandate to procure, 

monitor, or evaluate projects. 

20. The Immunities and Privileges Act 

The Immunities and Privileges Act states that the Government is not immune as 

regards “disputes of a commercial nature or proceedings relating to any interest of 



Final Report 

the state in, inter alia, immovable property in Malawi, proceedings relating to its 

membership (shareholding) of a body corporate which has members which are not 

states”. 

ISSUE: 

 

It would appear that enforcement of judgments against the Government by 

way of execution is still a matter that is not well-settled. This will cause 

concern to potential investors. It is critical that the Government should 

demonstrate that it respects the decisions of the courts by timely settling 

judgment debts. 

21. Capital Markets Development Act 

The Act provides a framework for creating a capital market, encouraging 

investments and regulating the market. The Exchange has developed procedures for 

listing and maintaining listed securities. 

ISSUE: 

 

Malawi now has a stock market on which a number of stocks are listed and 

traded. However, the market still remains shallow. This has implications on 

the ability of investors to raise significant capital for PPP projects. 

22. Banking Act, 1989 

The Banking Act was adopted in 1989. The principal aim of the Act is to provide for 

the regulation of the business of banking in Malawi conducted by commercial banks 

and financial institutions. The Act also provides for the Reserve Bank of Malawi’s 

supervision over banking business. 

ISSUES: 

Banks in Malawi earn their revenues, in the main, from their investment in 

government paper, and, to a lesser extent from their higher margin service 

businesses (primarily the purchase of foreign currency), rather than in credit 

activity. This means that securing capital in Malawi can be a problem in 

terms of insistence of banks on security and the high cost of debt capital. 

 

 

 

It is important to develop the capability of Malawi’s banking sector to 

appraise infrastructure projects, evaluate and adequately manage risks so 

that long-term funds could be released to this sector. 

Interest rates must come down to promote economic growth and to facilitate 

PPPs. This will, of necessity, involve a reduction in government borrowings, 

a reduction in reserve requirements which the Malawian banks need to 

deposit with the Reserve Bank, and a reduction in the high spreads of the 

banking sector. 

The creation of venture funds, in cooperation with donor countries and 

NGOs, should be encouraged. 



Final Report 

 

 

 

 

Institute private sector infrastructure financing facility with donor assistance 

Encourage commercial lending into PPPs by blending with donor financing 

Through regulatory guidelines, Malawi could explore the option of directing 

bank lending into infrastructure projects. 

Provide tax incentives for investments/lending to infrastructure projects. 

23. The Exchange Control Act 

The Exchange Control Act gives guidance and authority to authorized dealers to 

transact on behalf of Reserve Bank of Malawi on matters concerning foreign 

exchange. Briefly, the Exchange Control Act sets out the parameters for dealings in 

foreign currencies. 

ISSUE: 

 

As a result of the structure of the economy, foreign exchange availability can 

be problematic. This has consequences on the stability of the currency. 

Investors in PPP projects will view this as a risk. 

24. Competition and Fair Trading Act, 1998 

The purpose of the Competition and Fair Trading Act is to establish and encourage 

an environment in Malawi that is conducive to fair trade and the development of 

competitive markets in goods and services. To support this goal, the Competition 

Act establishes the Competition Fair Trading Commission. 

ISSUE: 

The commission was set up sometime last year. The secretariat is yet 

to become fully operational. Time is of the essence. It is suggested 

that PPPs as other facets of the economy will benefit from a fully 

operationalised Competition Commission. 

25. The Public Health Act 

The Public Health Act governs the health sector supported by the Nurses and Midwives 

Act; the Medical Practitioner and Dentists Act; the Pharmacy, Poisons and Medicines 

Act; and the Anatomy Act. CHAM’s administration of private hospitals is an example 

of PPPs at work. The government pays the salaries of staff while delivery of service is 

undertaken by CHAM. 

ISSUE: 

 

The main Act governing this sector is very old and could do with an overhaul 

that will seek to bring it in line with the realities of our world today. 

26. The Education Act 

The Ministry of Education administers the education sector through the Education Act. 



Final Report 

ISSUES: 

This Act is outdated. It could do with some review to bring it up to date. 

The sector needs to establish appropriate mechanisms to control quality. 

Develop systems that can ensure that there is transparency and 

accountability for the delivery of services. 

27. The Environment Management Act 

The Act’s main objective is to provide for the protection and management of the 

environment. The Act entitles every person to a right to a clean and healthy 

environment. 

ISSUE: 

 

Enforcement remains a huge challenge. There are competing demands between 

the need for development and the realisation that such development has to be 

undertaken in an environmentally friendly manner for it to be sustainable. 

28. Anti Money Laundering and Finance of Terrorism Bill 

Malawi does not have a law against money laundering or financing of terrorism. 

This has implications on the cost of doing business internationally. 

ISSUE: 

 

The cost of doing business internationally is said to have increased by as 

much as US$1.0 million per month by reason that Malawi does not have any 

legislation governing money laundering. A Bill has been before Parliament 

for a number of months. The approval of this bill is now a matter of great 

concern to captains of industry in Malawi. 

Potential areas for PPP Projects 

Local Assemblies: 

Under the government’s decentralisation policy, there are proposals to devolve 

water distribution and sales to local assemblies. The water boards will supply 

water in bulk to water reservoirs in the local assembly areas, from where local 

assemblies will distribute it to consumers in their areas, bill and collect the 

charges. However, local assemblies do not have the capacity to handle such 

tasks. This offers good potential for PPPs. 

Local Assemblies are also responsible for road maintenance. This is another area 

for PPPs. 

There are other infrastructure services as well which could be procured under 

PPP arrangements. 

Expanding the water kiosks is another possibility for PPPs. 

There are many opportunities for PPPs at the municipal level. Services such as 

sewage treatment, refuse collection, sanitation, city cleaning, landscaping, public 

transportation, kiosks to provide services to the public, public lavatories, car 

parking, covered markets, recreational facilities and even social services, all 

could be provided by the private sector in partnership with local governments. 



Final Report 

Health: 

Management of hospital infrastructure. 

There are a number of opportunities for PPPs in the health sector such as 

cleaning, catering, laundry, etc, but there are concerns over the capacity of the 

private sector to deliver their part of the bargain. 

Education: 

The private sector could operate public schools under a management contract 

with the schools remaining publicly owned and funded. 

Public schools and universities could contract out to the private sector to manage 

canteen, healthcare, and related facilities. 

The private sector could design, finance, construct and/or maintain and operate 

the facility under suitable contract with the public sector. There are several 

contractual variants possible for this, such as Build-Operate-Transfer, Build- 

Transfer-Lease and Build- Lease-Transfer. 

Forestry Act 

The new policy also recognises the role of the private sector not only in 

utilisation but also in the management of the forest resources. 

 

Since many parties external to forestry department have significant influence on 

the sector, institutional change has to be examined from a broader perspective, 

although the Forestry Department remains the institution with vested interest in 

drawing attention to the needs and potentials of the sector. There are two key 

institutional changes that are underway as the result of the change in forest 

policy, namely industrial plantations management by the private sector and 

community management of forest and tree resources. 

Tourism 

The Ministry of Information and Tourism is already familiar with PPP projects. The 

commonest are the concessions and management agreements of tourist facilities in 

various parts of the country. Ownership remains with the Government. Management is 

what is transferred to the private sector. The level the further risk to be transferred to 

the private sector will be a function of whether it is a concession or a mere management 

agreement. 

 

As Malawi remains one of the unspoilt destinations for eco-tourism but with 

very little infrastructure, opportunities are huge. Development in this sector 

remains dismal despite the Government’s declaration that this sector is a high 

priority sector. Partnership with the private sector thus presents one of the only 

remaining viable option for the development of tourism. 

Transport Sector 

The construction and upgrading of the road sector has provided new 

opportunities for local contractors. Toll-roads are likely not to be viable, unless 

the government is willing to subsidise them, as the traffic volumes are too low. 



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Telecommunications and Postal Services 

Privatising the retails operations of the post office. Presently franchising of lossmaking 

post offices is underway. Mail distribution and transport could be 

outsourced. There is also potential for outsourcing of services such as cleaning, 

maintenance, etc. 

Opportunities for PPPs in telecommunications will be greater once Malawi 

Telecoms is privatised. Outsourcing of services, maintenance, and installation are 

all possibilities for PPPs. 

Energy Sector 

There are opportunities for PPPs in small-scale power generation, such as 

photovoltaic power plants, micro hydro power plants, and the conversion of 

medium- and low-voltage customers to become electricity retailers. 

There are opportunities for outsourcing billing and collection, cleaning, 

maintenance, staff services, etc. 

There are possibilities of developing the coal sector using PPPs, although foreign 

partners would be required because of high levels of capital investment and 

technology. 

The development of strategic fuel reserves could be done as a PPP. Current 

reserves are between ten to fifteen days of demand. 

Law Development - Executive Branch 

Most of the laws that are tabled in the National Assembly for debate emanate from the 

Executive Branch of the Government 5 . A Government Department will provide the 

general outline – instructions so to speak – to the Ministry of Justice covering the gist of 

the issue that the instructing Ministry wishes to achieve through the proposed 

legislation. The Ministry of Justice then drafts the Bill and after it is agreed with the 

instructing Government Department, it is thereafter presented to the Cabinet Committee 

on Legal Affairs. If the matter subject of the law affects a sector committee of Cabinet 6 , 

the draft law needs to be considered by that sector Cabinet committee as well before it 

goes to full Cabinet. It is only after the Cabinet has approved the Bill that it is published 

in readiness for consideration by the National Assembly. 

Parliament 

Parliament in Malawi comprises not just the elected representatives of the people (MPs) 

but also the President. Legislative powers are vested in Parliament. Malawi has a 

unicameral system of Parliament. As discussed above, Bills are mainly tabled by the 

Executive Branch of Government. Any Bill needs to go through several stages: readings, 

committee stage, reporting stage, voting and passing into an Act of Parliament. Once 

passed, the President may assent or reject it. If it is rejected, it may be brought back to 

the House and if it is again adopted by the National Assembly, the President has no 

option over the matter but to assent to the Bill. 

5 There are draft laws that come into Parliament through Private Members’ Bills, but these are by far in the minority. 

6 In the case at hand, it is possible that the Cabinet Committee on Commerce may wish to review any new legislation that 

affects investment in the PPP arena. 



Final Report 

Implementation Unit – Legal Mandate 

There is growing unanimity that it would be preferable to have a unit that would 

facilitate PPPs in Malawi. This report discusses options for the possible institutional set 

up. Possible agencies could include the PC, MIPA, Office of the Directorate of Public 

Procurement, Department of Statutory Corporations, Public Enterprise Reform and 

Monitoring Unit (PERMU) or indeed a government department/ministry. What would 

be the ramifications from a legal point of view? 

Existing Organisation 

If an existing organization such as the PC or MDC were to be used for this 

purpose, we would suggest that the enabling Act should mention such an 

organization by name. As such a body would play a regulatory role, it would be 

beneficial to give it appropriate legal authority. This is true also if the 

Government chose to utilize a government ministry. Our view in such a case is 

that it would again be preferable to accord such government legal authority 

probably through the PPP legislation. Any administrative arrangements that 

would seek to utilize a government body without the accompanying legal 

authorization would be no improvement on the current status quo. 

New Organisation 

If a new organization altogether was to be set up, this could be achieved through 

the PPP-specific legislation. This would probably be the most natural choice, as 

it would obtain the highest legal recognition. Conceivably, there would be no 

legal obstacle why such an entity could not be a company incorporated under the 

Companies Act. We must confess though that since this organization would play 

regulatory role more than a trading one, we would have no immediate 

justification for proposing that this route be adopted. 

UPDATED IMPLEMENTATION TIMETABLE 

RESPONSIBLE 

OFFICE 

TIMING & RATIONALE 

Finalise PPP Concept and 

Immediate; to avoid duplication of effort and 

Synchronize with other PC, & Ministry of 

the possibility of initiatives with conflicting 

initiatives by other GoM Finance 

agendas 

Departments 

Develop PPP Policy PC & Ministry of By the end of October, 2006. IP3 have been 

Document 

Finance 

recruited to undertake this work. 

Secure Approval of PPP 

Policy Document 

PC, OPC, & 

By the end of December, 2006. 

Ministry of Finance 

Draft PPP Bill 

PC & JUSTICE 

By March, 2007. 

IP3 will provide a crude draft of the PPPspecific 

Legislation by the end of the 



Final Report 

Secure approval of the 

Cabinet Committee on 

Legal Affairs 

Secure approval of Cabinet 

Adopt Policy and Draft 

PPP Legislation 

Submit PPP Legislation to 

Parliament 

Upon approval of the PPP 

Legislation by Parliament, 

secure Assent of Bill by the 

President 

current assignment. 

PC & JUSTICE By May, 2007. 

JUSTICE 

Justice & Ministry 

of Finance 

JUSTICE 

JUSTICE 

Ensure that New PPP Act is 

Ministry of Finance 

made operational 

Resource the PPP 

Implementation Agency Ministry of Finance 

and Launch the Programme 

Set up PPP Implementation 

Office and fill vacancies & 

generally undertake the 

recruitments 

PC & Ministry of 

Finance 

By June, 2007. 

Cabinet now meets once every week. How 

quickly Cabinet considers a matter is a 

function of how much the sponsoring 

Minister is pushing it and the perceived 

importance of the particular matter. 

By June, 2007 

Consideration may be given to a low key 

publicity initiative 

By August, 2007 

The pipeline of Bills awaiting presentation 

to the National Assembly is large. Thus, to 

get a Bill through the approval process in 

the National Assembly could be an 

unpredictable exercise. 

By October/Novermber, 2007 

This should really be a matter of course 

unless during the approval process, 

Parliament introduces significant 

amendments to the PPP Legislation. 

By January, 2008 

This will require a Media Campaign that 

will aim at informing the public as to what 

is being contemplated by the new law. 

By April, 2008 

Preferably by the time the Act is being 

made operational, the funding should have 

been provided for. This may entail the 

making of appropriate provisions in the 

2007/2008 GoM Budget. 

By April, 2008 

It is envisioned that by this date, the Head 

of the Implementation Agency will have 

been recruited and he/she in turn will 

facilitate the recruitment of the rest of the 

identified support staff. 



Final Report 

Matt I unsure what to do from here ; I suggest just insert the work Dye complete and 

ignore this or stick it in another appendices as possible ‘alignment requirements 

This section includes the outline and draft text for the amended Public Enterprise Act. 

PPP ACT, Outline 

ARRANGEMENT OF SECTIONS 

PART I 

PRELIMINARY 

Preamble 

Recitals 

1. Short title 

2. Interpretation 

PART II 

THE PPP UNIT 

3. Establishment of the Unit 

4. Functions of a Government Authority 

5. Act confers additional powers 

6. Saving of prior agreements 

7. Changes in the status of Government Authorities 

8. Types if infrastructure 

9. Composition of the Board 

10. Co-opted Members 

11. Tenure of office and vacancies 

12. Allowances of members 

13. Authority and functions of the Board 

14. Provision of advice 

15. Proceedings of a Board meeting 

16. Committees of the Board 

17. Minutes of Meetings 

18. Disclosure of interest 

19. Seal of the Unit 



Final Report 

PART III 

SECRETARIAT 

20. Secretariat of the Agency 

21. Director General of the Agency 

22. Other Employees 

23. 23. Seal of the Unit 

PART V 

FINANCIAL PROVISIONS 

24. Raising resources for the PPP arrangements 

25. Minister may guarantee loans 

26. Minister may advance moneys from the Consolidated Fund 

27. Parliament to appropriate resources to fund the activities of the Agency 

28. Agency or Government Authority to keep record of cost of transactions 

29. Funding sources of the Agency 

30. Financial year of the Agency 

31. Agency to keep books of account 

PART VI 

PUBLICATION OF INFORMATION 

32. Publication of certain information 

33. Annual Reports 

34. Progress Reports 

35. Unauthorised persons not to publish or disclose information 

36. Oath of Secrecy 

37. Prohibition against disclosure of confidential information 

PART VI 

MISCELLANEOUS 

38. Prohibition against seeking to exert undue influence on officers 

39. Vesting of existing property 

40. Prior leases and agreements 

41. Arbitration 

42. Falsification of Information 

43. Penalties for offences 

44. Conflict with other laws 



Final Report 

45. Promulgation of regulations 

First Schedule 

Second Schedule 

Part I – Preliminary 

Preamble 

An Act to provide for the establishment of a body to be known as the PPP Development 

Agency and to define its functions, to provide for the legal, regulatory and institutional 

framework for the development of public-private partnerships in Malawi and to provide 

for matters connected with or incidental to the foregoing. 

Recitals 

WHEREAS the Government of Malawi recognizes the urgent need for adequate and 

sustainable infrastructure as a prerequisite to Malawi’s private sector led economic 

development and acknowledges its inadequate capacity to provide such infrastructure 

by itself; 

AND WHEREAS in order to accelerate the development of the required infrastructure, 

the Government deems it necessary to take comprehensive measures to create an 

investment climate that will promote its provision by the private sector on the basis of 

fair business principles; 

AND WHEREAS in order to encourage and facilitate collaboration between the 

Government and the private sector in the provision and operation of the said 

infrastructure, it is necessary to protect and secure the interest of consumers, 

community, and the private sector operators in a fair manner; 

AND WHEREAS the Government of Malawi considers it desirable to establish a 

favourable legislative framework to promote and facilitate the development and 

implementation of privately financed infrastructure projects by enhancing transparency, 

fairness, and long-term sustainability and removing undesirable restrictions on private 

sector participation in infrastructure development and operation; 



Final Report 

BE IT THEREFORE ENACTED by the Parliament of Malawi as follows – 

PART I 

PRELIMINARY 

Short Title 

1. This Act may be cited as the Public-private Partnership Development Act, 2007 

Interpretations 

2 (1) In this Act, unless the context otherwise requires - 

‘‘Agency’’ means the Public-private Partnership Development Agency or PPP 

Development Agency established by Section 3; 

‘‘appropriate Minister’’ means any Minister of the Government— 

(a) on whom functions stand conferred, or 

(b) who has general responsibility, 

in respect of or in connection with a public-private partnership; 

“bank” has the meaning ascribed thereto in the Banking Act; 

‘‘Board’’ means the Board of the Agency; 

“Chairperson” means the chairperson of the Agency appointed under Section 9; 

‘‘company’’ means a company within the meaning of Section 2 of the Companies Act, 

1984; 

“concessionaire” means a person that carries out an infrastructure project under a 

concession contract with a Government Authority; 

‘‘confidential information’’ in relation to Section 59 includes— 

(a) information that is designated by the Board or the Minister to be confidential 

either as regards particular information or as regards information of a particular 

class or description, 

(b) commercial information in relation to contractors, consultants, providers of 

finance or any other person, and 

(c) proposals of a commercial nature or tenders submitted to the Agency by 

contractors, consultants or any other person. 

“consultant” means any person engaged by the Agency to undertake any work of a 

specialized nature connected with the work of the Agency and includes banks, public 

accountants, lawyers and valuers; 

‘‘construction’’ includes building, refurbishment, maintenance, repair, improvement, 

demolition, extension and replacement; 

‘‘direct agreement’’ has the meaning given to it by Section 4(1)(c); 



Final Report 

‘‘Director General” means the chief executive officer of the Agency; 

‘‘equity’’ means any financial interest resulting from the purchase of shares for a 

consideration; 

“financial institution” has the meaning ascribed thereto in the Banking Act; 

‘‘functions’’ includes powers and duties, and a reference to the performance of functions 

includes, with respect to powers and duties, a reference to the exercise of the powers 

and the carrying out of the duties; 

‘‘Government Authority’’ means any of the persons and bodies outlined in the First 

Schedule; 

“immediate family member”, in relation to a person to whom Section 18 applies, 

means— 

(a) the person’s spouse, child, parent, brother, sister, grandchild, grandparent, or 

(b) a person with whom the person is cohabiting. 

‘‘infrastructure facility” includes an existing asset or an asset to be provided under a 

public-private partnership arrangement and means physical facilities and systems that 

directly or indirectly provide services to the general public; 

“investor” means an individual, a company, an established fund, a mutual fund, a 

financial institution, or any other institution, entity or commercial venture whether local 

or foreign, and in any format of enterprise recognized by the Companies Act, intending 

to invest in infrastructure facility under a public-private partnership arrangement, but 

does not include the Government, a Local Authority or a public enterprise; 

‘‘Local Authority’’ means a District Assembly, City Assembly, Town Assembly, or 

Municipal Assembly, for the purposes of the Local Government Act, 2001; 

‘‘Minister’’ means the Minister for Finance; 

‘‘operation’’ includes management and maintenance; 

‘‘partner’’ has the meaning given to it by Section 4(1)(a); 

‘‘public investment projects’’ includes projects involving public-private partnership 

arrangements; 

‘‘public-private partnership arrangement’’ has the meaning given to it by Section 4(1); 

‘‘Public Accounts Committee’’ means the Committee of Parliament of Malawi 

established under its Standing Orders and mandated to examine and report to the 

Parliament on the appropriation accounts and reports of the Auditor General; 

“Public Appointments Committee” means the Public Appointments Committee 

established under Section 56(7) of the Constitution; 

“public-private partnership” means a form of cooperation in which the Government 

partners with a private sector partner to build, expand, improve, or develop an 



Final Report 

enterprise in which each Government and the private sector partner contribute one or 

more of know-how, financial support, facilities, logistical support, operational 

management, investment or other input required for the successful deployment of a 

product or service, and for which each Government and the private sector partner is 

compensated in accordance with a pre-agreed plan, typically in relation to the risk 

assumed and the value of the result to be achieved; 

(2) In this Act— 

(a) a reference to a Section or Schedule is a reference to a Section of, or a 

Schedule to, this Act unless it is indicated that reference to some other enactment 

is intended, 

(b) a reference to a subsection or paragraph is a reference to the subsection or 

paragraph of the provision in which the reference occurs, unless it is indicated 

that reference to some other provision is intended, and 

(c) a reference to any other enactment shall, unless the context otherwise 

requires, be construed as a reference to that enactment as amended, extended or 

adapted by or under any subsequent enactment. 

Part II – The PPP Agency 

Establishment of the Agency 

3. (1) There is hereby established a body to be known as the Public-Private Partnership 

Development Agency which shall be a body corporate with perpetual succession and a 

common seal capable of suing and being sued in its corporate name, and to acquire, hold 

and dispose of land or an interest in land, and to acquire, hold and dispose of any other 

property and with power, subject to this Act, to do or perform all such acts and things as 

a body corporate may by law do or perform. 

(2) The Minister shall by Order published in the Gazette appoint a day to be the day on 

which this Act shall come into operation. 

Functions of a Government Authority 

4. (1) Without prejudice to the functions of a Government Authority under any other 

enactment, a Government Authority may, either itself or in conjunction with any other 

person (including another Government Authority)— 

(a) enter into a public-private partnership arrangement with a person (in this Act 

referred to as a ‘‘partner’’) for the performance of functions of the Government 

Authority specified in the arrangement in relation to— 



Final Report 

(i) the design and construction of an infrastructure facility, together with 

the operation of services relating to it and the provision of finance, if 

required, for such design, construction and operation; or 

(ii) the construction of an infrastructure facility, together with the 

operation of services relating to it and the provision of finance, if 

required, for such construction and operation; or 

(iii) the design and construction of an infrastructure facility, together with 

the provision of finance for such design and construction; or 

(iv) the provision of services relating to an infrastructure facility for not 

less than 5 years and the provision of finance, if required, for such 

services; 

(b) to the extent that a public-private partnership arrangement involves an 

existing infrastructure, the Government Authority will only undertake such 

work after ensuring that the Privatisation Unit has no plans to undertake similar 

work in terms of the Public Enterprises (Privatisation) Act; 

(c) subject to subsection (4), arrange or provide for a payment to a partner, 

(d) enter, where appropriate, into an agreement (in this Act referred to as a 

‘‘direct agreement’’) with a person who has arranged or provided funding for the 

partner for the carrying out of the public-private partnership arrangement, 

(e) transfer an interest, or part of an interest, of the Government Authority in an 

infrastructure facility or part of an infrastructure facility, to the partner, or, 

subject to the prior consent of the appropriate Minister or, if the Government 

Authority is a Minister of the Government, subject to the consent of the Minister 

for Finance, to a nominee of the partner by transfer, assignment, conveyance, 

grant of lease or licence or otherwise, 

(e) take a transfer of an interest of the partner or a nominee of the partner, in an 

infrastructure facility or part of an infrastructure facility, by transfer, assignment, 

conveyance, grant or surrender of lease or licence or otherwise., 

(2) Subject to subsection (3) and (4) the Government Authority may, whether or not for 

consideration, transfer, convey or assign its interest in any real or personal property 

(including leaseholds) owned or held by such Government Authority to a company 

formed under Section 13 for the purpose of enabling such a company to carry out its 

financing functions in connection with public investment projects. 

(3) A Government Authority shall not convey, assign or transfer any such property to 

any such company unless the consent of the Minister and the appropriate Minister has 

been obtained. 



Final Report 

(4) A Government Authority may attach such terms and conditions as it considers 

appropriate to any transfer, conveyance or assignment pursuant to subsection (1). 

(5) The Minister may, on the advice of the Agency and with the approval of the Cabinet, 

from time to time, issue policy directions prescribing further objectives and forms of 

public-private partnership arrangements and the guidelines to be followed for the 

proper and effective implementation of the provisions of this Act, and such objectives 

and guidelines shall be valid for all purposes unless inconsistent with the Act and only 

to the extent of the inconsistency. In accordance with this provision, the Public-private 

Partnerships Development Policy of 2007 constitutes the current policy of the 

Government. 

(6) A public-private partnership arrangement may include terms and conditions in 

relation to the performance by the partner concerned of the partner’s obligations under 

the arrangement as agreed by the Government Authority. 

(7) (a) Where a payment is arranged or provided for pursuant to Section 4(1)(c) the 

Minister may, at any time until entry into the public-private partnership arrangement by 

the Government Authority, give directions to the appropriate Minister in relation to the 

aggregate value of the moneys committed to such arrangements, as he or she considers 

necessary. 

(b) The appropriate Minister shall, in performing his or her functions, have regard to any 

directions given by the Minister under this Section. 

(8) Functions conferred on a Government Authority by this Section are in addition to 

and not in substitution for any other functions of the Government Authority. 

(9) The public-private partnership arrangements undertaken pursuant to the provisions 

of this Act shall be carried out based on the principle of fairness; transparency; and 

accountability. 

Act confers additional powers 

5. (1) For so long as it continues in force, a public-private partnership arrangement shall 

operate to confer on the partner concerned the functions of the Government Authority 

specified in the arrangement, subject to any terms and conditions so specified. 

(2) A function conferred on a partner by a public-private partnership arrangement— 

(a) may be performed by the partner in the partner’s own name, subject to the 

general superintendence and control of the Government Authority concerned, 




Final Report 

(b) shall, notwithstanding such arrangement, continue to be vested in the 

Government Authority concerned concurrently with the partner and may be 

performed by either or both of them. 

(3) The conferral of a function of a Minister of the Government on a partner by a publicprivate 

partnership arrangement shall not affect the Minister’s responsibility to 

Parliament or as a member of the Government for the performance of the function. 

(4) In this Section ‘‘functions’’, in relation to a Government Authority , includes 

functions of any other Government Authority to be performed by it pursuant to an 

agreement or arrangement duly made by it with that other Authority . 

Saving of prior agreements 

6. Where an agreement or arrangement was entered into on a date before the 

commencement of this Act, and that agreement or arrangement would have been a 

public-private partnership arrangement or direct agreement if this Act had been in 

operation on such date, then the agreement or arrangement, as the case may be, shall 

have effect and be taken always to have had effect as if this Act was in operation when 

the arrangement or agreement was entered into. 

Changes in the status of Government Authorities 

7. (1) Where the Minister, following consultation with any appropriate Minister, is of the 

opinion that— 

(a) a public authority not standing specified as a Government Authority in the 

First Schedule ought, having regard to the purposes of this Act, to stand so 

specified, or 

(b) having regard to the amalgamation, dissolution or change of name of a 

Government Authority, the Government Authority ought to cease to be specified 

in the Schedule or to be so specified under a different name or description, he or 

she may, by Order, amend the Schedule by adding the name of a person or body 

to it or by deleting the name of a person or body specified in it or by so adding 

and deleting, as the case may be. 

Types of infrastructure 

8. A Government Authority can enter into a public-private partnership arrangement 

involving the following types of infrastructure- 

(a) transportation infrastructure; including road, rail, marine, and air transport; 

(b) infrastructure for the extraction, processing and distribution of potable water,; 



Final Report 

(c) waste water infrastructure; 

(d) telecommunication infrastructure; 

(e) energy infrastructure; 

(f) mineral, petroleum and natural gas infrastructure; 

(g) education and health infrastructure; and 

(h) any other type of infrastructure as the Minister may from time to time designate 

by notice published in the Gazette. 

Composition of the Board 

9. (1) The Board shall consist of a seven members who will be appointed by the 

President by notice published in the Gazette, and every such appointment shall be 

subject to confirmation by the Public Appointments Committee. 

(2) In appointing members under subsection (1), the President shall have regard to the 

need for continuity of service on the Board, so that at least half of the members 

appointed thereunder shall be reappointed for the next term of office. 

(3) Once confirmed by the Public Appointments Committee the members shall elect 

from amongst their number a chairperson of the Board. 

(4) Subject to term limits herein, once appointed, members can only be discharged in line 

with the provisions of Section 11 below. 

(5) The Chairperson and members shall have at least two of the following attributes- 

(a) more than ten years’ experience in commercial enterprise in the capacity of 

management; 

(b) professional experience of ten years or more in the financial, accounting, 

legal, economic or other relevant industry in a position of responsibility in which 

decisions were required to be taken by the potential member on behalf of the 

employer; 

(c) professional, regulatory or governmental experience in anti-competition or 

anti-trust compliance or enforcement for no less than ten years; 

(d) ten years or more experience as a government official responsible for 

management of fiscal responsibility, budget, financial accountability or similar 

tasks; 

(e) certification as a public accountant in Malawi or elsewhere having at least the 

standards of Malawi for certification; 

(f) certification as an attorney in Malawi or elsewhere having at least the 

standards of Malawi for certification; 



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(g) ten years professional experience in a position requiring expertise in 

economics; or 

(h) achievement of the level of university degree, in finance, law, accounting, 

economics and/or public policy. 

(6) The President shall, in so far as is practicable and having regard to relevant 

experience, ensure an equitable balance between men and women and public and 

private sector experience in the composition of the Board. 

Co-opted Members 

10. (1) The Board may in its discretion at any time and for any period invite any person, 

to attend any meeting of the Board or of any of its committees and take part in the 

deliberations of the meeting, but such person or officer shall not be entitled to vote at 

such meeting. 

(2) Section 18 shall apply, mutatis mutandis, to a person or an officer attending a meeting 

of the Board pursuant to subsection (1). 

Tenure of office and vacancies 

11. (1) Subject to Section 9 above, a member of Board shall hold office for a period of 

four years and shall be eligible for reappointment the, but the office of that member shall 

become vacant - 

(a) if he or she resigns his or her membership by letter addressed to the President 

and the resignation shall take effect from the date specified in the letter or upon 

receipt of the letter by the President, whichever is the later; or 

(b) upon his or her death; or 

(c) if he or she is absent, without the consent in writing of the Chairperson or 

without valid excuse, from three consecutive meetings of the Agency of which he 

or she has had notice; or 

(d) if he or she becomes an undischarged bankrupt; or 

(e) if he or she participates directly or indirectly in a public-private partnership 

arrangement; or 

(f) makes a composition or arrangement with creditors; or 

(g) is convicted of an indictable offence in relation to a corporate body, including 

an offence under the Companies Act, 1984; or 

(h) is convicted of an offence involving fraud or dishonesty, or 

(i) is disqualified or restricted from being a director of any company; or 



Final Report 

(j) if a member of the Board is for stated reasons removed from membership of 

the Board by the President if, in the President’s opinion, the member has become 

incapable through ill-health of performing his or her functions. 

(2) If a member of the Board dies, resigns, retires, becomes disqualified or is removed 

from office, the President may appoint a person to be a member to fill the casual vacancy 

so occasioned and the person so appointed shall be appointed in the same manner as, 

and for the remainder of the term of office of, the member of the Board who occasioned 

the casual vacancy. 

(3) A member of the Board whose period of membership expires by the passage of time 

shall be eligible for re-appointment as a member of the Board, but shall not serve more 

than 2 terms. 

Allowances of members 

12. The members of the Board shall each be paid such remuneration and such 

allowances for expenses as the Minister shall from time to time determine. 

Authority and functions of the Board 

13.(1) The functions of the Board shall be to plan, manage, implement and control 

public-private partnership arrangements, or other form of undertaking public 

investment projects in Malawi and in particular, but without derogation from the 

generality of the foregoing— 

(a) to advise any Government Authority of what, in the opinion of the Agency, 

are the optimal means of financing the cost of public investment projects in order 

to achieve value for money; 

(b) to formulate, and recommend to the Minister for approval, public-private 

partnership policy guidelines; 

(c) to implement public-private partnership arrangements in accordance with 

this Act and the regulations issued hereunder; 

(d) to advance moneys (including repayable loans and equity) and to enter into 

other financial arrangements in respect of projects approved by any Government 

Authority; 

(e) to provide advice to any Government Authority on all aspects of financing; 

refinancing and insurance of public investment projects to be duly undertaken by 

means of public-private partnership arrangements or within the public sector, 

(f) to form, or cause to be formed, companies, subject to the approval of the 

Minister, for the purpose of securing finance for public investment projects 



Final Report 

where, in the opinion of the Agency, it is necessary or expedient to do so in order 

to discharge its functions under this Act; 

(g) to monitor progress of the implementation of public-private partnership 

arrangements in Malawi and report same to the Cabinet on a regular basis that is 

no less often than on a quarterly basis, 

(f) to prepare a long term action plan and submit such plan to the Minister for 

approval; and 

(g) to do all such things as are necessary or incidental or conducive to the better 

carrying out of the functions of the Agency specified in this Act. 

(2) The Board shall have all such other powers as are necessary or expedient for the 

performance of its functions, including the engagement from time to time of consultants 

and advisers and other service providers. 

(3) In carrying out its functions, the Board shall comply with all guidelines and 

instructions that the Minister may, from time to time, issue to the Agency. 

Provision of advice 

14. (1) In providing advice under this Act, the Board shall have regard to— 

(a) such policy directions as the Minister may issue for the purposes of this 

paragraph to Government Authorities from time to time in relation to the 

financing of public investment projects, and 

(b) such policy guidance as the Minister may issue for the purposes of this 

paragraph to Government Authorities from time to time in relation to the 

process, procedures and regulation generally of public-private partnership 

arrangements. 

(2) The Minister shall cause a copy of every policy direction and policy guidance issued 

under subsection (1) to be sent to the Agency. 

(3) The provision of advice by the Agency under this Act may include, where 

appropriate, advice as regards the engaging of consultancy services across the range of 

technical and other relevant expertise necessary to undertake such projects. 

(4) Subject to any guidelines that the Minister may from time to time issue for the 

purposes of this Section and other provisions of the Act in respect of public investment 

projects, including— 

(a) the type of project, 

(b) the size of the project, 

(c) the stage of development of the project, and 



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(d) any other relevant factors that will determine projects on which the Agency’s 

advice will be sought, 

a Government Authority shall seek the advice of the Agency as soon as is 

practicable before undertaking a public investment project. 

(5) In the discharge of functions under this Act the Agency shall at all times exercise due 

care, skill, prudence and diligence and act in the utmost good faith. 

Proceedings of a Board Meeting 

15. (1) The Board of the Agency shall, subject to this Act— 

(a) ensure that the functions of the Agency are being performed effectively, 

(b) set the strategic objectives and targets to be met by the Agency, 

(c) ensure that the objectives and targets are met, 

(d) be responsible for preparation and presentation, for approval or reporting, of 

an Annual Work Plan, Annual Budgets and Five-year Corporate Strategic Plan, 


(e) meet for the transaction of business at least once every three months at such 

places and at such times as the Chairperson may determine. 

(2) A special meeting of the Board may be called by the Chairperson upon written notice 

of not less than fourteen (14) days received from any member of the Board and shall be 

called if at least four members so request in writing- 

Provided that if the urgency of any particular matter does not permit the giving of such 

notice, a special meeting may be called upon giving a shorter notice, so long as the 

member of the Board calling the meeting and alleging the emergency contacts directly 

and advises in person each member of the Board of the meeting, its time, date and place, 

and provides a description of the emergency, and does all possible to enable such 

member to attend the meeting in person or by conference call. In the case of emergency 

meetings, attendance by real time telephone conference shall be the equivalent as 

attendance in person. 

(3) Half of the members of the Board shall form the quorum of any meeting of the Board. 

(4) There shall preside at any meeting of the Agency - 

(a) the Chairperson; or 

(b) in the absence of the Chairperson such member as the Chairperson may 

designate or such member as the members present and forming a quorum may 

elect from among their number for the purpose of that meeting. 

(5) The decision of the Board on any matter before any meeting shall be that of the 

majority of the members present and voting at the meeting and, in the event of an 



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equality of votes, the person presiding shall have the casting vote in addition to his or 

her deliberative vote. 

(6) No member of the Board shall attend to the business of his office within the Board 

through a representative and where a member is unable to attend any meeting of the 

Board he may request that his apologies for failure to attend be recorded, except for 

instances within this Act where attendance is permitted by the member via real time 

conference call. 

(7) The Board may act notwithstanding one or more vacancies among its members or at 

the meeting, provided there is a quorum at the meeting. 

(8) Subject to this Act, the Board shall regulate, by standing orders or otherwise, the 

procedure and business of meetings of the Board. 

Committees of the Board 

16. (1) The Board may establish committees and delegate to any such committee such of 

its functions as it considers necessary, and the Board may appoint as members of a 

committee established under this subsection persons who are or are not members of the 

Agency and such persons shall hold office for such period as the Agency may 

determine. 

(2) Subject to any special or general direction of the Board, any committee established 

under this Section may regulate its own procedure. 

Minutes of Meetings 

17. The Board shall cause minutes to be kept of the proceedings of every meeting of the 

Agency and of every meeting of a committee of the Agency. 

Disclosure of interest 

18. (1) A Board member, an employee of the Agency or a consultant to the Agency who, 

or whose immediate family member, is directly or indirectly interested in a private or 

professional or official capacity in any matter relating to any public investment projects 

being considered by the Agency shall disclose such interest. 

(2) Where a member of the Board or a member of the staff of the Agency, or a consultant, 

adviser or other person engaged by the Agency, has a pecuniary interest or other 

beneficial interest in, or material to, any matter which falls to be considered by the Board 

or by the Agency itself, he or she shall— 

(a) disclose to the Board or, as the case may be, to the Director General, the 

nature of his or her interest in advance of any consideration of the matter, 



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(b) neither influence nor seek to influence a decision to be made in relation to the 

matter, and 

(c) take no part in any consideration of the matter, and— 

(i) absent himself or herself from the meeting or that part of the meeting 

during which the matter is discussed, and 

(ii) not vote on a decision relating to the matter. 

(3) For the purposes of this Section, but without prejudice to the generality of subsection 

(1), a person shall be regarded as having a beneficial interest if— 

(a) he or she or any immediate family member or any nominee of his or her or 

any connected person, is a member or director of a company or any other body 

which has a beneficial interest in, or material to, a matter referred to in that 

subsection , 

(b) he or she or any immediate family member is in partnership with or is in the 

employment of a person who has a beneficial interest in, or material to, such a 

matter, 

(c) he or she or any immediate family member is a party to any arrangement or 

agreement (whether or not enforceable) to which such a matter relates, or 

(d) any immediate family member has a beneficial interest in, or material to, such 

a matter. 

(4) For the purposes of this Section a person shall not be regarded as having a beneficial 

interest in, or material to, any matter— 

(a) by reason only of an interest of his or hers or of any company or of any other 

body or person mentioned in subsection (2) which is so remote or insignificant 

that it cannot reasonably be regarded as likely to influence a person in 

considering, discussing or in voting on, any question with respect to the matter, 

or in performing any function in relation to that matter, or 

(b) if he or she can show that at the material time he or she was unaware, and in 

the circumstances could not possibly have been aware, that a immediate family 

member had an interest referred to in subsection (2). 

(5) Where an interest is disclosed pursuant to this Section, the disclosure shall be 

recorded in the minutes of the meeting of the Board, or otherwise duly recorded by the 

Director General. 

(6) Where at a meeting of the Board, or otherwise within the Agency, a question arises as 

to whether or not a course of conduct, if pursued by a person, would constitute a failure 

by him or her to comply with the requirements of subsection (1), the question shall be 

determined by the chairperson of the meeting or by the Director General, as appropriate, 



Final Report 

whose decision shall be final, and where such a question is so determined, particulars of 

the determination shall be recorded in the minutes of the meeting of the Board or 

otherwise duly recorded by the Director General. 

(7) Where the Minister is satisfied, on being informed by the Board, that a member of the 

Board (including the Chairperson) has contravened subsection (1), the Minister shall 

decide the appropriate action (including removal from office) to be taken in relation to 

that member of the Board. The Minister may, if he or she thinks fit, remove that member 

of the Board (including the Chairperson) from office. 

(8) Where the Chairperson is satisfied that a consultant, adviser or other person engaged 

by the Agency, has contravened subsection (1), the Chairperson shall decide the 

appropriate action to be taken. 

(9) Where the Director General of the Agency is satisfied that a member of the staff of the 

Agency has contravened subsection (1), the Director General of the Agency shall decide 

the appropriate action to be taken. 

(10) The Agency may issue and publish guidelines as to what may further constitute an 

interest for the purpose of this Section. 

Seal of the Agency 

19. (1) The Agency shall, as soon as practicable after its establishment, procure a seal. 

(2) The seal of the Agency shall be authenticated by the signature of— 

(a) the Chairperson and one other member of the Board, or 

(b) 2 members of the Board, authorised by the Board to act in that behalf. 

(3) Judicial notice shall be taken of the seal of the Agency and every document 

purporting to be an instrument made by the Agency and to be sealed with the seal of the 

Agency (purporting to be authenticated in accordance with this Section) shall be 

received in evidence and be deemed to be such instrument without proof unless the 

contrary is shown. 

(4) Any contract or instrument which, if entered into or executed by a person not being a 

body corporate, would not require to be under seal may be entered into and executed by 

the Director General or such as senior officials of the Agency authorised by the Board for 

that purpose. 

Part III - Secretariat 

Secretariat of the Agency 



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20. The Secretariat of the Agency shall consist of the Director General and other 

employees of the Agency appointed under this Part. 

Director General of the Agency 

21. (1) The Agency shall appoint, on such terms and conditions as it may determine, a 

Director General of the Agency who shall be the chief executive officer of the Agency 

and shall in addition perform such duties as the Board shall assign to his office and 

ensure the effective administration and implementation of the provisions of this Act. 

The Director General shall, at a minimum, meet the qualification requirements of a 

member as stipulated in Section 9(5). 

(2) The Director General shall – 

(a) report and be accountable to the Board; and 

(b) carry out such duties as the Board shall assign to him or her. 

(3) Without derogation from the generality of the responsibilities and duties of the 

Director General conferred under subsection (1), the duties of the Director General shall 

include the following - 

(a) to formulate and submit to the Board proposals and recommendations for the 

development of public investment projects; 

(b) to prepare for consideration by the Board the policy framework, programme 

strategies, selection criteria and annual targets for public investment projects; 

(c) to establish operational guidelines and transparent procedures for 

preparation and implementation of public investment projects; and 

(d) to carry out studies on issues relating to improving the business environment 

and recommend policy changes to facilitate public investment projects. 

(4) The Director General or, in his absence, such other officer of the Agency as the 

Director General may designate shall attend meetings of the Board and may address 

such meetings, but shall not vote on any matter- 

Provided that the person presiding at any meeting may, for good cause which shall be 

recorded in the minutes of the meeting require the Director General or such other officer 

to withdraw from such meeting. For the purpose of this Subsection good cause shall 

mean exclusively that highly sensitive or confidential information is to be revealed or 

that information concerning the Director General is to be discussed, including by way of 

example, performance, salary, contract terms, etc. and in that case the Director General 

shall be excused from the meeting only for the time of the highly sensitive or 

confidential discussion and such departure from the meeting due to such discussion 

shall be recorded in the minutes of the meeting. 



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Other employees 

22. The Agency may appoint, on such terms and conditions as it may determine, such 

other employees, subordinate to the Director General, as it considers necessary for the 

performance of its function and to assist the Director General in discharging his duties 

and responsibilities. 

Part V – Financial Provisions 

Raising resources for PPP arrangements 

47. (1) Subject to subsection (2) and to such guidelines as the Minister may issue, the 

Agency may from time to time raise money in any currency. 

(2) The combined net aggregate of the principal of all moneys raised and outstanding by 

the Agency and any companies formed under Section 13(1)(f) shall not exceed such total 

sum as the Minister from time to time set and publish in the Gazette. 

(3) The Agency may engage in transactions of a normal banking nature with the Minister 

or any Government Authority and any other persons for the purpose of performing any 

of its functions. 

(4) The Agency may open and operate bank accounts, including accounts in currencies 

other than the currency of the Republic of Malawi. 

Minister may guarantee loans 

48. (1) The Minister may subject to the provisions of the Public Finance Management 

Act, 2003, guarantee the due repayment by the Agency or any companies formed under 

Section 13(1)(f) of the principal of any moneys raised by the Agency or such companies, 

or the payment of interest on such moneys or both the repayment of the principal and 

the payment of the interest, and any such guarantee may include a guarantee of the 

payment by the Agency or such companies of Unit and incidental expenses arising in 

connection with such moneys. 

(2) The Minister shall, as soon as may be after the expiration of every financial year, lay 

before Parliament a statement setting out with respect to each guarantee given under 

this Section during that year or given at any time before, and in force at, the 

commencement of that year— 

(a) particulars of the guarantee, including the remaining life of the guarantee; 

(b) in case any payment has been made by the Minister under the guarantee 

before the end of that year; and 



Final Report 

(c) the amount of moneys covered by the guarantee which was outstanding at the 

end of that year. 

(3) Moneys paid by the Minister under a guarantee under this Section shall be repaid to 

the Minister, with interest on it at such rate or rates as he or she appoints, by the Agency 

or any company referred to in subsection (1), as the case may be, within 2 years from the 

date of the advance of the moneys out of the Consolidated Fund. 

(4) If the amount is not repaid as stipulated in subsection (3) above, and without 

prejudice to any other method of recovery, the same shall be recoverable as a simple 

contract debt in any court of competent jurisdiction. 

(5) In relation to guarantees given by the Minister under this Section in respect of 

moneys in a currency other than the currency of the Republic of Malawi— 

(a) each of the references to principal, each of the references to interest and the 

reference to Unit and incidental expenses in subsection (1) shall be taken as 

referring to the equivalent in the currency of the Republic of Malawi of the actual 

principal, the actual interest and the actual Unit and incidental expenses, 

respectively, such equivalent being calculated according to the cost in the 

currency of the Republic of Malawi of the actual principal, the actual interest or 

the actual Unit and incidental expenses, as may be appropriate, at the time the 

calculation is made; 

(b) the reference to moneys in subsection (2) shall be taken as referring to the 

equivalent in the currency of the Republic of Malawi of the actual moneys, such 

equivalent being calculated according to the rate of exchange for that currency 

and the currency of the Republic of Malawi at the time the calculation is 

made; and 

(c) each of the references to moneys in subsection s (3) and (4)shall be taken as 

referring to the cost in the currency of the Republic of Malawi of the actual 

moneys. 

(6) Any payment by the Minister under this Section shall be a charge on the 

Consolidated Fund. 

Minister may advance moneys from the Consolidated Fund 

49. (1) The Minister may advance moneys from the Consolidated Fund to the Agency 

or a company formed under Section 13(1)(f) on such terms and conditions as he or she 

may determine. 

(2) Moneys advanced under subsection (1) may include moneys for the purpose of 

making an equity investment in such a company. 



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Parliament to appropriate resources to fund the activities of the Agency 

50. The expenses incurred by the Minister in the administration of this Act shall be paid 

out of moneys provided by the Parliament and those incurred by any other Minister of 

the Government shall, to such extent as may be sanctioned by the Minister, be paid out 

of such moneys. 

Agency or Government Authority to keep record of cost of transactions 

51. To the extent possible, the Agency or the Government Authority, as the case may be, 

shall prepare a statement of its costs up to and including closing related to a particular 

public-private partnership arrangement, in addition to anticipated post-transaction costs 

based on the obligations and commitments of the Government Authority entering into 

such a public-private partnership arrangement. 

Funding sources of the Agency 

52. (1) Subject to subsection (2), the funds of the Agency shall consist of such moneys as 

may - 

(a) be appropriated by Parliament for the purposes of the Agency; 

(b) be received by the Agency under subsection (2); and 

(f) otherwise vested in or accrued to the Agency from government allocations. 

(2) The Agency may – 

(a) accept money by way of grants or donations from any source in or outside 

Malawi provided that such source and their principals, relatives, related entities, 

representatives or affiliated parties of any type, have not theretofore participated 

directly or indirectly in any public investment projects in Malawi and shall 

thereafter be disqualified from participating in any public investment projects in 

Malawi; 

(b) subject to the approval of the Minister, raise, by way of loans from any source 

in or outside Malawi, such money as it may require for the discharge of its 

functions, provided that such source shall comply with the restraints in 

subsection (a) above; and 

(c) charge and collect fees in respect of programmes, publications, seminars, 

documents, consultancy services and other services provided by the Agency. 

(3) The Agency may invest in such manner as it thinks fit such of its funds as it does not 

immediately require for the performance of its functions. 



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Financial year of the Agency 

53. The financial year of the Agency shall be the period of twelve months ending on 31st 

July in each year or on such other date as the Minister may specify by Order published 

in the Gazette, provided that the first financial year of the Agency may be such shorter 

or longer period than twelve months as the Minister shall determine but being not less 

than six months nor more than eighteen months. 

Agency to keep Books of Account 

54. (1) The Agency shall cause to be kept proper books of account and other records 

relating to its account. 

(2) The accounts of the Agency shall be audited annually by independent auditors 

appointed by the Agency. 

Part VI – Publication of Information 

Publication of certain Information 

55. (1) The Agency shall maintain detailed records of - 

(a) the public-private partnership arrangement transactions that have been 

undertaken; 

(b) the registered consultants, valuers, lawyers, public accountants and banks 

dealing with the public-private partnership arrangements; 

(c) the bidders and bid prices; 

(d) the successful bidders and the reason for selecting such bidders; 

(e) the cost of transactions and any other special conditions of the public-private 

partnership arrangements; and 

(f) any other matters as the Agency may deem appropriate. 

(2) The Agency shall prepare for approval of the Board and thereafter subsequent 

publication of an Annual Business Plan and a Three-year Strategy Plan. 

Annual Reports (1) As soon as practicable, but not later than six months after the expiry 

of each financial year, the Agency shall submit to the Minister a report concerning its 

activities during that financial year. 

(2) The report referred to in subsection (1) shall be in such form as the Minister shall 

approve and shall include information on the financial affairs of the Agency and there 

shall be appended to the report - 

(a) an audited balance sheet; 



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(b) an audited statement of income and expenditure; and 

(c) such other information as the Agency may consider appropriate or as the 

Minister may direct. 

(3) The Minister shall, during the meeting of the Parliament next following receipt by 

him of the report referred to in subsection (1), lay the report before the Parliament, but 

otherwise the Agency may publish the report for public-private partnership 

arrangement to the public. 

Progress reports 

57. The Agency shall every quarter, at the end of September, December, March, and June 

produce a report to Cabinet on its activities during that period, giving details of bids 

received and selected and other particulars and shall publish the report for sale to the 

public. 

Prohibition against publication or disclosure of certain information 

58. (1) No person shall, without the consent in writing given by or on behalf of the 

Agency, publish or disclose to any person, otherwise than in the course of his duties, the 

contents of any document, communication or information which relates to, and which 

has come to his knowledge in the course of, his duties under this Act. 

(2) Any person who knowingly contravenes subsection (1) shall be guilty of an offence. 

Oath of secrecy 

59. Every - 

(a) member of the Board; 

(b) member of a committee of the Board; 

(c) employee of the Agency; 

(d) consultant in the service of the Agency, 

shall, upon assumption of his office, take such oath of secrecy as may be 

approved by the Agency or as may otherwise be prescribed under this Act or 

presented as a guideline in the regulations. Provided, however, that the Agency 

and its consultants shall not be constrained by such oath of secrecy where 

responding to challenges or claims made against the Agency or any member by 

third parties, provided further that the response does not disclose more 

information than reasonably required to address fully the challenge or claim. 

Unauthorised persons not to publish or disclose information 



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60. (1) Save as otherwise provided by law, a person shall not disclose confidential 

information obtained by him or her while performing (or as a result of having 

performed) duties under this Act as— 

(a) a member of the Board, 

(b) Director General, 

(c) a member of the staff of the Agency, or 

(d) an adviser or consultant to the Agency, or an employee of such person whilst 

performing duties relating to such advice or consultation, or obtained while in 

performance of a service contract, unless he or she is duly authorised by the 

Agency to do so. 

(2) A person who contravenes subsection (1) is guilty of an offence and is liable on 

conviction to a fine not exceeding K100,000 or to imprisonment for a term not exceeding 

12 months or to both. 

(3) Nothing in subsection (1) shall prevent disclosure of information to the Board, the 

Director General or the Minister. 

Part VII – Miscellaneous Provisions 

Prohibition against seeking to exert undue influence on officers 

61. (1) A person who communicates with a member of the Board, the Director General, a 

member of the staff of the Agency, or a consultant, adviser or other person engaged by 

the Agency, for the purpose of influencing improperly his or her consideration of any 

matter which falls to be considered or decided by the Agency is guilty of an offence. 

(2) If a person referred to in subsection (1) to whom a communication is made is of the 

opinion that a communication may be in contravention of subsection (1), it shall be his or 

her duty not to entertain the communication further and he or she shall inform forthwith 

the Chairperson of the Board in writing of the substance of such communication and the 

Chairperson shall acknowledge in writing the receipt of such information. 

(3) A person guilty of an offence under subsection (1) is liable on summary conviction to 

a fine not exceeding K100,000 and/or imprisonment for a term not exceeding 12 months. 

Vesting of existing property in the Agency 

62. Any property procured or acquired for the purposes of the public sector investment 

programme shall, on commencement of this Act, vest in the Agency. 

Prior leases and agreements 



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63. (1) Any leases and agreements entered into in relation to enterprises to be privatized 

under this Act in anticipation of the coming into force of this Act are hereby nullified. 

(2) Subject to the laws of Malawi including the laws on limitations, the Agency shall 

have power to inquire into the public-private partnership arrangement of any public 

enterprise effected at any time before 1996 to determine whether or not the publicprivate 

partnership arrangement was done in the best public interest. 

(3) Subject to the laws of Malawi, including the laws on limitations, where the Agency is 

of the opinion that the public-private partnership arrangement referred to in subsection 

(2) was sufficiently damaging to the public interest so as to be considered improper, it 

may declare such transaction to be ultra vires for reasons it shall report publicly in 

writing, and the Agency shall have the power to renegotiate the purchase of the public 

enterprise in question with the new owner thereof, following, as far as possible, the 

principles and procedures outlined in this Act. 

Arbitration 

64. Any dispute between an investor, a partner, a Government Authority and the 

Agency arising from or relating to a public-private partnership arrangement shall be 

settled by arbitration in accordance with the Arbitration Act. 

Falsification of information 

65. (1) A person who knowingly - 

(a) falsifies any information; 

(b) does not disclose any material facts when lawfully required to do so; and/or 

(c) solicits for use by any person not authorized under this Act any confidential 

information, relating to the privatisation of a public enterprise shall be guilty of an 

offence. 

(2) A person convicted of an offence under subsection (1) shall not thereafter be eligible 

to participate in public sector investment programme in Malawi. 

Penalty for offences 

66. A person guilty of an offence under this Act shall be liable to a fine of K100,000 or of 

an amount equivalent to the financial gain or loss generated by the offence, if such 

amount be greater, and/or to imprisonment for five years. 

Conflict with other laws 



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67. To the extent that the provisions of the Public Procurement Act and any other laws 

are in conflict with the provisions of this Act, the provisions of this Act shall prevail. 

Promulgation of Regulations 

68. The Minister, on the advice of the Agency, may promulgate regulations prescribing- 

(a) tender procedures; 

(c) prequalification and registration of bidders procedures; 

(d) public announcement requirements; 

(g) negotiation guidelines; 

(h) final transaction monitoring guidelines; 

(i) Pre and post public-private partnership arrangement audit requirements; 

(j) Any forms required for the purposes of this Act; 

(k) Anything required to be prescribed under, or for the purposes of, this Act; 


(l) such other matters as are necessary or conducive for the better carrying out of 

this Act. 

Passed in Parliament this _____ day of ______, two thousand seven. 

Clerk of Parliament 

First Schedule 

Government Authority shall include: 

1. A Ministry or Department of the Government, 

2. A Regional Authority, 

3. A Local Authority, and 

4. The National Roads Authority. 

Second Schedule 

S. 34 

List of Projects that can be negotiated without following the provisions of the Act 



Final Report 

Annex B. 

DRAFT REGULATIONS 

PROCEDURES FOR PUBLIC PRIVATE PARTNERSHIP 

ARRANGEMENTS 

46. Selection of Concessionaire 

47. Procedures for pre-selection proceedings 

48. Prequalification criteria 

49. Formation of bidding consortia 

50. Evaluation of expressions of interest 

51. Procedures for request for proposals 

52. Information to be contained in Request for Proposals 

53. Request for Proposals to set out principal terms 

54. Amendment of request for proposals 

55. Criteria for evaluating technical and financial proposals 

56. Evaluation of proposals 

57. Resubmission of qualification statement 

58. Ranking of proposals and ensuing negotiations 

59. Negotiations of a concession contract without competitive procedures 

60. Engagement of concessionaire without following procedures in the Act 

61. Unsolicited proposals will be considered in exceptional cases 

62. Procedures for dealing with unsolicited proposals 

63. When an unsolicited may be considered 

64. Government Authority may require to establish a basis of comparison for unsolicited 

proposal 

65. Proposals shall be treated confidentially 

66. Summary of essential terms of a concession contract to be published 

67. Government Authority to keep record of proceedings 

68. Prohibition against officials participating in public-private partnerships 

arrangements 

Bidder may file a claim for loss, etc 

1. Definitions 

In these regulations, unless the context indicates otherwise, a word or expression to 

which a meaning has been assigned in the Act, has the same meaning, and – 



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“affordability” means that the financial commitments to be incurred by a Government 

Authority in terms of the public-private partnership arrangement can be met by funds – 

(a) designated within the Government Authority’s existing budget for the 

infrastructure facility to which the agreement relates; and/or 

(b) destined for the Government Authority in accordance with the Ministry of 

Finance ’s future budgetary projections for that Government Authority ; 

“Controlling Officer” means any person appointed by the President or other appointing 

authority who is – 

(a) the head or principal person in charge of a Ministry or Department or public 

enterprise; and 

(b) charged with the duty to, or who actually does, collect, receive, disburse or 

deal in any way with any public money, or a person who is charged with the 

purchase, receipt, custody, or disposal of, or the accounting for, any public 

resources or public securities; 

“Government property” includes all movable and immovable property belonging to the 

Government as well as intellectual property rights vested in the Government; 

“Project Officer” means a person identified by the Controlling Officer of a Government 

Authority, who is capable and appropriately qualified to manage a PPP to which that 

Government Authority is party from its inception to its expiration or termination; 

"public enterprise" means a corporation, board, Unit, company, parastatal body or 

similar body, corporate or unincorporate, in which the Government has direct or 

indirect ownership, equity or interest and includes partnerships, joint ventures or any 

other form of business arrangement or organization or any commercial entities or 

commercial assets howsoever held or created in which the Government has direct or 

indirect interest but does not include a Government department; 

“transaction adviser ” means a person or persons appointed in writing by a Controlling 

Officer of a Government Authority, who has or have appropriate skills and experience 

to assist and advise the Government Authority in connection with a PPP, including the 

preparation and conclusion of a Public-private partnership agreement ; and 

“value for money” means that the provision of the infrastructure facility or the use of 

Government property by a partner in terms of the Public-private partnership agreement 

results in a net benefit to the Government Authority defined in terms of cost, price, 

quality, quantity, risk transfer or a combination thereof. 

2. Exclusive competency of Controlling Officers 

2.1 Only the Controlling Officer of a Government Authority may enter into a Publicprivate 

partnership agreement on behalf of that Government Authority. 



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3. Project inception – Ministry of Economic Planning and Development Approval 

3.1 As soon as the Government Authority identifies a project that may be concluded as a 

PPP, the Controlling Officer must in writing – 

(a) Seek the approval of the Ministry of Economic Planning and Development 

through the Agency for the inclusion of the project on the Government’s priority 

list of development projects pursuant to the country’s Economic Growth and 

Development Strategy; 

(b) upon securing the approval from the Ministry of Economic Planning and 

Development referred to in (a) above, to satisfy the Agency that adequate 

expertise within that Government Authority exists to proceed with the PPP; 

(c) appoint a Project Officer from within or outside the Government Authority; 


(d) appoint a transaction adviser if the Agency so advises. 

3.2 The Ministry of Economic Planning and Development approval referred to in 

regulation 3.2 shall be regarded as Ministry of Economic Planning and Development 

Approval. 

4 Feasibility study – Ministry of Finance Approval: Level I 

4.1 To determine whether the proposed PPP is in the best interests of a Government 

Authority, the Controlling Officer of that Government Authority must undertake a 

feasibility study that- 

(a) explains the strategic and operational benefits of the proposed PPP for the 

Government Authority in terms of its strategic objectives and government 

policy; 

(b) describes in specific terms – 

(i) in the case of a PPP involving the performance of a Government 

function, the nature of the infrastructure facility concerned and the extent 

to which this function, both legally and by nature, may be performed by a 

partner ; and 

(ii) in the case of a PPP involving the use of Government property, a 

description of the Government property concerned, the uses, if any, to 

which such Government property has been subject hitherto and a 

description of the types of use that a partner may legally subject such 

Government property to; 

(c) in relation to a PPP pursuant to which a Government Authority will incur any 

financial commitments, demonstrates the affordability of the PPP for the 

Government Authority; 

(d) sets out the proposed allocation of financial, technical and operational risks 

between the Government Authority and the partner; 

(e) demonstrates the anticipated value-for-money to be achieved by the PPP; and 

(f ) explains the capacity of the Government Authority to procure, implement, 

manage, enforce, monitor and report on the PPP; 



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4.2 A Government Authority may not proceed with the procurement phase of a PPP 

without prior written approval of the Ministry of Finance for the feasibility study. 

4.3 The Ministry of Finance approval referred to in regulation 4.2 shall be regarded as 

Ministry of Finance Approval Level I. 

4.4 If at any time after Ministry of Finance Approval Level I has been granted in respect 

of the feasibility study of a PPP, but before the grant of Ministry of Finance Approval III 

in respect of the PPP agreement recording that PPP, any assumptions in such feasibility 

study are materially revised, including any assumptions concerning affordability, value 

for money and substantial technical, operational and financial risk transfer, then the 

Controlling Officer of the Government Authority must immediately – 

(a) provide the Ministry of Finance through the Agency with details of the 

intended revision, including the purpose and impact of the intended revision on 

the affordability, value for money and risk transfer evaluation contained in the 

feasibility study; and 

b) ensure that the Ministry of Finance is provided with a revised feasibility study 

after which the Ministry of Economic Planning and Development may grant a 

revised Ministry of Finance Approval Level I. 

5 Procurement – Ministry of Finance approvals: Levels IIA and IIB 

5.1 Prior to the issuing of any procurement documentation for a PPP to any prospective 

bidders, the Government Authority must obtain through the Agency approval from the 

Ministry of Finance for the procurement documentation, including the draft Publicprivate 

partnership agreement. 


Ministry of Finance Approval Level IIA. 

5.3 The procurement procedure must be in accordance with a system that is fair, 

equitable, transparent, competitive and cost-effective and consistent with the provisions 

of the Act; 

5.4 After the evaluation of the bids, but prior to appointing the preferred bidder, the 

Government Authority must submit a report through the Agency for approval by the 

Ministry of Finance, demonstrating how the criteria of affordability, value for money 

and substantial technical, operational and financial risk transfer were applied in the 

evaluation of the bids, demonstrating how these criteria were satisfied in the preferred 

bid and including any other information as required by the Ministry of Finance . 


Ministry of Finance Approval Level IIB. 

6 Contracting Public-private partnership agreements – Ministry of Finance Approval: 

III 



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6.1 After the procurement procedure has been concluded but before the Controlling 

Officer of a Government Authority concludes a Public-private partnership agreement, 

that 

Controlling Officer must obtain approval from the Ministry of Finance – 

(a) that the Public-private partnership agreement meets the requirements of 

affordability, value for money and substantial technical, operational and 

financial risk transfer as approved in terms of regulation 4.2 or as revised in 

terms of regulation 4.4; 

(b) for a management plan that explains the capacity of the Government 

Authority, and its proposed mechanisms and procedures, to effectively 

implement, manage, enforce, monitor and report on the PPP; and 

(c) that a satisfactory due diligence including a legal due diligence has been 

completed in respect of the Controlling officer’s and the proposed partner in 

relation to matters of their respective competence and capacity to enter into the 

Public-private partnership agreement. 

6.2 The Ministry of Finance approval referred to in regulation 6.1 shall be referred to as 

Ministry of Finance Approval Level III. 

7 Management of Public-private partnership agreements 

7.1 The Controlling Officer of the Government Authority that is party to a Public-private 

partnership agreement is responsible for ensuring that the Public-private partnership 

agreement is properly implemented, managed, enforced, monitored and reported on, 

and must maintain with the assistance of the Agency such mechanisms and procedures 

as approved in the Ministry of Finance Approval Level III for – 

(a) measuring the outputs of the Public-private partnership agreement; 

(b) monitoring the implementation of and performances under the Public-private 

partnership agreement; 

(c) liaising with the partner; 

(d) resolving disputes and differences with the partner; 

(e) generally overseeing the day-to-day management of the Public-private 

partnership agreement; and 

(f) reporting on the Public-private partnership agreement in the Government 

Authority’s annual report. 

7.2 A Public-private partnership agreement involving the performance of an 

infrastructure facility does not divest the Controlling Officer of the Government 

Authority concerned of the responsibility for ensuring that such infrastructure facility is 

effectively and efficiently performed in the public interest or on behalf of the public 

service. 

7.3 A Public-private partnership agreement involving the use of Government property 

by a partner does not divest the Controlling Officer of the Government Authority 

concerned of the responsibility for ensuring that such Government property is 

appropriately protected against forfeiture, theft, loss, wastage and misuse. 



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8 Amendment and variation of Public-private partnership agreements 

8.1 The prior written approval of the Ministry of Finance is required for any material 

amendments to a Public-private partnership agreement, including any material 

variations to the outputs therein, or any waivers contemplated or provided for in the 

Public-private partnership agreement . 

8.2 The Ministry of Finance will approve a material amendment only if it is satisfied that 

the Public-private partnership agreement , if so amended, will continue to provide – 

(a) value for money; 

(b) affordability; and 

(c) allocation of risks. 

8.3 The Controlling Officer must substantially follow the procedure prescribed by 

regulations 4 and 6 for obtaining such Ministry of Finance approval. 

9 Agreements binding on the Government 

9.1 A Public-private partnership agreement or an agreement amending a Public-private 

partnership agreement, binds the Government only if the agreement was entered into on 

behalf of a Government Authority – 

(a) by the Controlling Officer of that Government Authority ; and 

(b) if all Ministry of Finance approvals required in terms of these regulations 

have been granted by the Ministry of Finance in respect of the PPP. 

Selection of the Concessionaire 

23. The selection of the concessionaire shall be conducted in accordance with the 

provisions of this Act and the Regulations. 

Procedures for pre-selection proceedings 

24. (1) The Government Authority shall engage in pre-selection proceedings with a view 

to identifying bidders that are suitably qualified to implement the envisaged 

infrastructure project. 

(2) The invitation to participate in the pre-selection proceedings shall be published in 

accordance with the Regulations issued pursuant to the provisions of this Act. 

(3) To the extent not already required by the Regulations, the invitation to participate in 

the pre-selection proceedings shall include at least the following- 

(a) A description of the infrastructure; 

(b) An indication of other essential elements of the project, such as the services to 

be delivered by the concessionaire, the financial arrangements envisaged by the 


(c) Where already known, a summary of the principal terms of the concession 

required by the Government Authority; 



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(d) The manner and place of submission of applications for pre-selection and the 

deadline for the submission, expressed as a specific date and time, allowing 

sufficient time for bidders to prepare and submit their applications; and 

(e) The manner and place for solicitation of the pre-selection documents. 

(4) To the extent not already required by the Regulations, the invitation to participate in 

the pre-selection documents shall include at least the following- 

(a) The pre-selection criteria in accordance with Section 25; 

(b) Whether the Government Authority intends to waive the limitation on 

participation of consortia set forth in Section 26; 

(c) Whether the Government Authority intends to request only a limited number 

of pre-selected bidders to submit proposals upon completion of the pre-selection 

proceedings in accordance with Section 26(2) and, if applicable, the manner in 

which this selection will be carried out; and 

(d) Whether the Government Authority intends to require the successful bidder 

to establish an independent legal entity established and incorporated under the 

laws of Malawi in accordance with Section 13(1); 

(5) For matters not provided for in this Section, the pre-selection proceedings shall be 

conducted in accordance with the Regulations. 

Prequalification criteria 

25. In order to qualify for the selection proceedings, interested bidders must meet 

objectively justifiable criteria that the Government Authority considers appropriate in 

the particular proceedings, as stated in the pre-selection documents. These criteria shall 

include at least the following- 

(a) Adequate professional and technical qualifications, human resources, 

equipment and other physical facilities as necessary to carry out all the phases of 

the project , including design, construction, operation and maintenance; 

(b) Sufficient ability to manage the financial aspects of the project and capability 

to sustain its financing requirements; and 

(c) Appropriate managerial and organisational capability, reliability and 

experience, including previous experience in operating similar infrastructure 

facilities. 

Formation of bidding consortia 

26. (1) The Government Authority, when first inviting the participation of bidders in the 

selection proceedings, shall allow them to form bidding consortia. The information 



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required from members of the bidding consortia to demonstrate their qualifications in 

accordance with Section 25 shall relate to the consortium as a whole as to its individual 

participants. 

(2) Unless otherwise authorised by the Agency and stated in the pre-selection 

documents, each member of the consortium may participate, either directly or indirectly, 

in only one consortium at the same time. A violation of this requirement shall cause the 

disqualification of the consortium and of the individual members. 

(3) When considering the qualifications of the bidding consortia, the Government 

Authority shall consider the capabilities of each of the consortium members and assess 

whether the combined qualifications of the consortium members are adequate to meet 

the needs of all phases of the public investment project. 

Evaluation of expressions of interest 

27. (1) The Government Authority shall make a decision with respect to the 

qualifications of each bidder that has submitted an application for pre-selection. In 

reaching that decision, the Government Authority shall apply only the criteria that are 

set forth in the pre-selection documents. All pre-selected bidders shall thereafter be 

invited by the Government Authority to submit proposals in accordance with Sections 

24 to 35. 

(2) Notwithstanding subsection 28(1) above, the Government Authority may, provided 

that it has made an appropriate statement in the pre-selection documents to that effect, 

reserve the right to request proposals upon completion of the pre-selection proceedings 

only from a limited number of bidders that best meet the pre-selection criteria. For this 

purpose, the Government Authority shall rate the bidders that meet the pre-selection 

criteria on the basis of the criteria applied to assess their qualifications and draw up the 

list of bidders that will be invited to submit proposals upon completion of the preselection 

proceedings. In drawing up the list, the Government Authority shall apply 

only the manner of rating that is set forth in the pre-selection documents. 

Procedures for request for proposals 

28. (1) The Government Authority shall provide a set of the request for proposals and 

related documents issued in accordance with Section 29 to each pre-selected bidder that 

pays the price, if any, charged for those documents. 

(2) Notwithstanding the above, the Government Authority may use a two-stage 

procedure to request proposals from pre-selected bidders when the Government 

Authority does not deem it to be feasible to describe in the request for proposals the 



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characteristics of the project such as project specifications, performance, financial 

arrangements or contractual terms in a manner sufficiently detailed and precise to 

permit final proposals to be formulated. 

(3) Where a two-stage procedure is used, the following provisions apply- 

(a) The initial request for proposals shall call upon the bidders to submit, in the 

first stage of the procedure, initial proposals relating to project specifications, 

performance indicators, financing requirements or other characteristics of the 

project as well as to the main contractual terms proposed by the Government 

Authority. 

(b) The Government Authority may convene meetings and hold discussions with 

any of the bidders to clarify questions concerning the initial request for proposals 

or the initial proposals and accompanying documents submitted by the bidders. 

The Government Authority shall prepare minutes of any such meeting or 

discussion containing the questions raised and the clarifications provided by the 


(c) Following examination of the proposals received, the Government Authority 

may review and, as appropriate, revise the initial request for proposals by 

deleting or modifying any aspect of the initial project specifications, performance 

indicators, financing requirements or other characteristics of the project, 

including the main contractual terms, and any criterion for evaluating and 

comparing proposal and for ascertaining the successful bidder, as set forth in the 

initial request for proposals, as well as by adding characteristics or criteria to it. 

The Government Authority shall indicate in the record of the selection 

proceedings to be kept pursuant to Section 44 the justification for any revision to 

the request for proposals. Any such deletion, modification or addition shall be 

communicated in the invitation to submit final proposals; 

(d) In the second stage of the proceedings, the Government Authority shall invite 

the bidders to submit final proposals with respect to a single set of project 

specifications, performance indicators or contractual terms in accordance with 

Sections 24 to 35. 

Information to be contained in Request for Proposals 

29. To the extent not already required by the Regulations, the request for proposals shall 

include at least the following information- 

(a) General information as may be required by the bidders in order to prepare 

and submit their proposals; 



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(b) Project specifications and performance indicators, as appropriate, including 

the Government Authority’s requirements regarding safety and security 

standards and environmental protection; 

(c) The contractual terms proposed by the Government Authority, including an 

indication of which terms are deemed to be non-negotiable; 

(d) The criteria for evaluating proposals and the thresholds, if any, set by the 

Government Authority for identifying non-responsive proposals; the relative 

weight to be accorded to each evaluation criterion and the manner in which the 

criterion and thresholds are to be applied in the evaluation and rejection of 

proposals. 

Request for Proposals to set out principal terms 

30. (1) The request for proposals shall set forth the requirements with respect to the 

issuer and the nature, form, amount and other principal terms and conditions of the 

required bid security; 

(2) A bidder shall not forfeit any bid security that it may have been required to provide, 

other than in cases of- 

(a) Withdrawal or modification of a proposal after the deadline for submission of 

proposals and, if so stipulated in the request for proposals, before that deadline; 

(b) Failure to enter into final negotiations with the Government Authority 

pursuant to Section 35(1); 

(c) Failure to submit its best and final offer within the time limit prescribed by 

the Government Authority pursuant to Section 35(2); 

(d) Failure to sign the concession contract, if required by the Government 

Authority to do so, after the proposal has been accepted; and 

(e) Failure to provide required security for the fulfilment of the concession 

contract after the proposal has been accepted or to comply with any other 

condition prior to signing the concession contract specified in the request for 

proposals. 

Amendment of the request for proposals 

31. The Government Authority may, whether on its own initiative or as a result of a 

request for clarification by a bidder, review and, as appropriate, revise any element of 

the request for proposals as set forth in Section 26. The Government Authority shall 

indicate in the record of the selection proceedings to be kept pursuant to Section 44 the 

justification for any revision to the request for proposals. Any such deletion, 



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modification or addition shall be communicated to the bidders in the same manner as 

the request for proposals at a reasonable time prior to the deadline for submission of 

proposals. 

Criteria for evaluating technical and financial proposals 

32. (1) The criteria for evaluation and comparison of the technical proposals shall include 

at least the following- 

(a) Technical soundness; 

(b) Compliance with environmental standards; 

(c) Operational feasibility; 

(d) Quality of services and measures to ensure their continuity. 

(2) The criteria for evaluation and comparison of the financial and commercial proposals 

shall include, as appropriate- 

(a) The present value of the proposed tolls, unit prices and other charges over 

the concession period; 

(b) The present value of the proposed direct payments by the Government 

Authority, if any; 

(c) The costs for the design and construction activities, annual operation and 

maintenance costs, present value of capital costs and operating and maintenance 

costs; 

(d) The extent of financial support, if any, expected from a public authority of the 

Republic of Malawi; 

(e) The soundness of the proposed financial arrangements; 

(f) The extent of acceptance of the negotiable contractual terms proposed by the 

Government Authority in the request for proposals; 

(g) The social and economic development potential offered by the proposals. 

Evaluation of proposals 

33. (1) The Government Authority shall compare and evaluate each proposal in 

accordance with the evaluation criteria, the relative weight accorded to each such 

criterion and the evaluation process set forth in the request for proposals. 

(2) For the purposes of subsection (1) above, the Government Authority may establish 

thresholds with respect to quality, technical, financial and commercial aspects. 

Proposals that fail to achieve the thresholds shall be regarded as non-responsive and 

rejected from the selection procedure. 



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Resubmission of qualifications statement 

34. The Government Authority may require any bidder that has been pre-selected to 

demonstrate again its qualifications in accordance with the same criteria used for preselection. 

The Government Authority shall disqualify any bidders that fails to 

demonstrate its qualifications if requested to do so. 

Ranking of proposals and ensuing negotiations 

35. (1) The Government Authority shall rank all responsive proposals on the basis of the 

evaluation criteria and invite for final negotiation of the concession contract the bidder 

that has attained the best rating, final negotiations shall not concern those contractual 

terms, if any, that were stated as non-negotiable in the final request for proposals. 

(2) If it becomes apparent to the Government Authority that the negotiations with the 

bidder invited will not result in a concession contract, the Government Authority shall 

inform the bidder of its intention to terminate the negotiations and give the bidder 

reasonable time to formulate its best and final offer. If the Government Authority does 

not find the proposal acceptable, it shall terminate the negotiations with the bidder 

concerned. The Government Authority shall then invite for negotiations the other 

bidders in the order of their ranking until it arrives at a concession contract or rejects all 

remaining proposals. The Government Authority shall not resume negotiations with a 

bidder with which negotiations have been terminated pursuant to this paragraph. 

Negotiation of concession contracts without competitive procedures 

36. Subject to the joint approval of Directorate of Public Procurement and the Agency, 

the Government Authority is authorised to negotiate a concession contract without 

using the procedure set forth in this Act in the following cases- 

(a) When there is an urgent need for ensuring continuity in the provision of the 

service and engaging in the procedures ser forth in this Act would be impractical, 

provided that the circumstances giving rise to the urgency were neither foreseeable 

by the Government Authority nor the result of the dilatory conduct in its part; 

(b) Where the project is of short duration and the anticipated initial investment 

value does not exceed the amount set forth in the Second Schedule hereto; 

(c) Where the project involves national defence or national security; 

(d) Where there is only one source of providing the required service, such as 

when the provision of the service requires the use of intellectual property, trade 

secrets or other exclusive rights owned or possessed by a certain person or persons; 



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(e) In cases of unsolicited proposals falling under Section 38; 

(f) When an invitation to the pre-selection proceedings or a request for 

proposals has been issued but no applications or proposals were submitted or all 

proposals failed to meet the evaluation criteria set forth in the request for proposals 

and if, in the judgment of the Government Authority, issuing a new invitation to the 

pre-selection proceedings and a new request for proposals would be unlikely to 

result in a project award within the required time frame; 

(g) In other cases where the Minister through the Agency authorises such an 

exception for compelling reasons of public interest. 

Engagement of concessionaire without following procedures in the Act 

37. Where a concession contract is negotiated without using the procedures set forth in 

Sections 24 to 35, the Government Authority shall- 

(a) Except for concession contracts negotiated pursuant to Section 36(c), 

cause a notice of its intention to commence negotiations in respect of a 

concession contract to be published in the Gazette; 

(b) Engage in negotiations with as many persons as the Government 

Authority judges capable of carrying out the project as circumstances permit; 

(c) Establish evaluation against which proposals shall be evaluated and 

ranked. 

Unsolicited Proposals 

38. As an exception to the provisions contained in Sections 24 to 35, the Government 

Authority is authorised to consider unsolicited proposal pursuant to the procedures set 

forth in Sections 37 to 39, provided that such proposals do not relate to a project for 

which selection procedures have been initiated or announced. 

Procedures for dealing with unsolicited proposals 

39. (1) Following receipt and preliminary examination of an unsolicited proposal, the 

Government Authority shall promptly inform the proponent whether or not the project 

is considered to be potentially of public interest. 

(2) If the project is considered to be potentially in the public interest under subsection (1) 

above, the Government Authority shall invite the proponent to submit as much 

information on the project as is feasible at this stage to allow the Government Authority 

to make a proper evaluation of the proponent’s qualifications and the technical and 

economic feasibility of the project and to determine whether the project is likely to be 



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successfully implemented in the manner proposed in terms acceptable to the 

Government Authority. For this purpose, the proponent shall submit a technical and 

economic feasibility study, an environment impact study and satisfactory information 

regarding the concept or technology contemplated in the proposal. 

(3) In considering an unsolicited proposal, the Government Authority shall respect the 

intellectual property, trade secrets or other exclusive rights contained in, arising from or 

referred to in the proposal. Therefore, the Government Authority shall not make use of 

information provided by or on behalf of the proponent in connection with its unsolicited 

proposal other than for the evaluation of that proposal, except with the consent of the 

proponent. Except as otherwise agreed by the parties, the Government Authority shall, 

if the proposal is rejected, return to the proponent the original and any copies of 

documents that the proponent submitted and prepared throughout the procedure. 

When an unsolicited may be considered 

40. (1) Except in the circumstances set forth in Section 36, the Government Authority 

shall, if it decides to implement the project, initiate a selection procedure in accordance 

with this Act if the Government Authority considers that- 

(a) The envisaged output of the project can be achieved without the use of 

intellectual property, trade secrets or other exclusive rights owned or possessed 

by the proponent; and 

(b) The proposed concept or technology is not truly unique or new. 

(2) The proponent shall be invited to participate in the selection proceedings initiated by 

the Government Authority pursuant to subsection (1) and may be given an incentive or 

a similar benefit in a manner described by the Government Authority in the request for 

proposals in consideration for the development and submission of the proposal. 

Government Authority to establish a basis of comparison for unsolicited proposal 

41. (1) If the Government Authority determines that the conditions of subsections 38(1) 

(a) and (b) are not met, it shall not be required to carry out a selection procedure 

pursuant to the provisions of Sections 24 to 35 this Act. However, the Government 

Authority may still seek to obtain elements of comparison for the unsolicited proposal in 

accordance with the provisions set out subsections 2 to 4 of this section. 

(2) Where the Government Authority intends to obtain elements of comparison for the 

unsolicited proposal, the Government Authority shall publish a description of the 

essential output elements of the proposal with an invitation for other interested parties 



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to submit proposal with the invitation for other interested parties to submit proposals 

within a reasonable period. 

(3) If no proposals in response to an invitation issued pursuant to subsection 2 above are 

received within a reasonable period, the Government Authority may engage in 

negotiations with the original proponent. 

(4) If the Government Authority received proposals in response to an invitation issued 

pursuant to subsection 2 above, the Government Authority shall invite the proponents 

to negotiations in accordance with the provisions set forth in Section 35. In the event 

that the Government Authority receives a sufficiently large number of proposals, which 

appear prima facie to meet its infrastructure needs, the Government Authority shall 

request the submission of proposals pursuant to the provisions of this Act, subject to any 

incentive or other benefit that may be given to the person who submitted the unsolicited 

proposal in accordance with Section 38(2). 

Proposals shall be treated confidentially 

42. The Government Authority shall treat proposals in such a manner as to avoid the 

disclosure of their content to competing bidders. Any discussions, communications and 

negotiations between the Government Authority and a bidder pursuant to Sections 

26(3), 35, 34, 35 or 39(3) and (4) shall be confidential. Unless required by law or by a 

Court Order or permitted by the request for proposals, no party to the negotiations shall 

disclose to any other person any technical, price or other information in relation to 

discussions, communications and negotiations pursuant to the aforementioned 

provisions without the consent of the other party. 

Summary of essential terms of a concession contract to be published 

43. Except for the concession contracts awarded pursuant to Section 34(c), the 

Government Authority shall cause a notice of the contract award to be published in the 

Gazette. The notice shall identify the concessionaire and include a summary of the 

essential terms of the concession contract. 

Government Authority to keep record of proceedings 

44. The Government Authority shall keep an appropriate record of information 

pertaining to the selection and award proceedings in accordance with the Public 

Procurement Act, 2003. 

Prohibition against officials participating in Public-private Partnership Arrangements 



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45. No member of the Cabinet, staff member of the Government Authority, or staff 

member of the Ministry of Finance, or board member of the Agency or of a committee of 

the Agency and no employee of the Agency or consultant to the Agency or respective 

intimate family member shall participate in public-private partnership arrangement or a 

company set up for that purpose directly or indirectly. 

Bidder may file a claim for loss, etc 

46. A bidder that claims to have suffered, or that may suffer, loss or injury due to a 

breach of a duty imposed on the Government Authority by the law may seek review of 

the Government Authority’s acts or failures to act in accordance with Public 

Procurement Act, 2003. 



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Annex C. 

SCHEDULES TO REGULATIONS 

PPP Needs Assessment and Project Selection 

The fist step in determining the technical profile, operations, service delivery targets, 

and future income and costs of the project is to perform a demand analysis. All PPP 

infrastructure projects should be “demand driven,” meaning that the interest on the part 

of Government to promote the project should be driven by a commensurate desire on 

the part of consumers to use the services. 

Demand analysis requires that surveys be 

taken, which is probably one reason why 

demand analysis is often overlooked 

when governments decide to sponsor PPP 

projects. It is important to keep in mind 

that PPP projects must be financially viable, 

so consumer demand as a key driver of 

future revenues for the financial 

projections must be confirmed by 

Key Components of Demand Analysis 

consumer surveys. The demand analysis confirms key components that will drive the 

financial projections (see text box above). 

Once consumer demand has been established by the survey, the selection of which PPP 

project to propose for Government participation, and the ranking or prioritization of 

those projects, is a matter of internal policies and priorities of the proposing institutions. 

The prospective private partners in the PPP projects will have to perform their own 

detailed research and analysis to confirm consumer demand, affordability, and 

willingness to pay. The research and analysis performed by Government institutions 

proposing PPP projects will be only an initial indication of consumer acceptance of the 

project and its tariffs. 

 

 

 

What quantity of new services provided by 

the project will consumers demand (e.g. what 

will be the traffic volume on a new toll road); 

What prices will consumers be willing to pay, 

given pre-defined service quality standards; 


What prices will be affordable to those 

consumers. 

PPP Project Evaluation and Feasibility Analysis 

After completing the demand analysis to confirm that future users of the services want 

to have those services and are willing and able to pay the level of tariff necessary to 

attract private investment and increase the quantity and quality of service delivery, the 

next step is to perform Options Analysis and the Feasibility Study. 

Options Analysis 

Examining options means exploring the various ways that the desired services can be 

most efficiently and effectively provided. This is a complex and time-consuming 

process and one that is often passed over because of the complexity and time 

consumption. The international experience has been that potential project sponsors 

simply put together an “off the shelf” list of projects and propose them to the PPP Unit. 

What then often happens is consultants are engaged, at considerable expense, to perform 

the feasibility analysis and at the end of that process the fatal flaws that have previously 



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caused that project to not be implemented are discovered and confirmed again, the 

result of which is a lot of time and expense wasted and no progress toward improved 

service delivery. 

Options analysis means staying focused on the targeted service delivery and examining 

all possible options for delivering those services, regardless of what projects might have 

already been developed or planned to a certain degree by the potential project sponsor. 

In performing options analysis, many factors have to be taken into consideration 

regarding how the potential project could impact other related forms of service delivery. 

In practice, options analysis often becomes compromised by political factors. For 

example, if an agency proposes a light rail transit system and the options analysis 

reveals that it would be better to widen the highway, then a political conflict could 

emerge between the agency that does rail transit and the agency that does highways. 

There are also personal factors that come into play, as some degree of engineering and 

planning has to be invested before proposing a new project. The investment of these 

resources makes it hard for an agency to accept that a different option could be more 

effective and efficient. 

Options analysis is a good way to ferret out possible corruption in the early stages of 

project development. When a government official becomes irrationally in opposition to 

the selection of an option other than the one he/she has proposed, then there could be a 

hidden financial reason why the person continues to support the first option. 

Feasibility Analysis 

Once the options analysis has been done, the project sponsor should conduct a prefeasibility 

study. The first component of the feasibility study is the results of the demand 

and willingness to pay study described earlier. The reason this section is the first area of 

focus in the feasibility study is all well-designed PPP projects must be “demand driven.” 

The second component is the options analysis described above. That analysis will show 

that the proposed project is likely to be the optimal method of providing the services 

that the user demand study revealed as being desirable and affordable to the users. This 

options analysis section will quickly address any fundamental issues that are likely to 

arise among stakeholders considering the proposed project. 

Once user demand, willingness to pay, and affordability, and elimination of other 

options to the proposed project have been demonstrated as described above, then the 

next section of the feasibility study should be a detailed description of the project. In 

order to prepare this section, there will be a need to conduct some preliminary 

engineering and capital expenditure analysis. This technical and financial design and 

analysis does not have to be highly detailed because all of that will be done by the 

private partner. This is an important feature of PPP projects. Having the private partner 

do the detailed technical and financial design takes a burden (and cost) off of 

Government, and encourages private sector innovation and efficiency. 



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The final section of the feasibility study is the financial projections. The first part of the 

financial projections must be an Inputs sheet that draws data from the user demand 

study. Also on the inputs sheet are the capital expenditure estimates obtained from the 

initial engineering review. At the bottom of the sheet should be key financial indicators 

such as Financial Internal Rate of Return (FIRR), Economic Internal Rate of Return 

(EIRR), Net Present Value (NPV), Return on Equity (ROE) or Equity FIRR, and Return 

on Investment (ROI). 

Normally, feasibility analysis is conducted in two stages: (1) a pre-feasibility study, 

consisting of preliminary research and analysis along with data from previous studies, is 

prepared to enable the PPP Unit to issue a Request for Expressions of Interest; and (2) a 

feasibility study, which builds upon the pre-feasibility study by providing new research 

and detailed analysis, to enable the PPP Unit to issue a Request for Proposals. Bidders 

will have to perform their own due diligence and prepare the comprehensive feasibility 

studies that will be required to secure project financing. Feasibility research and 

analysis performed by PDF consultants will be limited in scope, designed only to 

provide data and analysis necessary to produce reliable tender documents that have 

enough information and analysis to enable bidders to submit responsive proposals. 

PPP Procurement and Contracting 

The tendering and procurement process for PPP is different from standard procurement, 

and more complex in some ways. While standard procurement requires governments to 

do most of the design and engineering, and then publish tenders to invite the private 

sector to provide those facilities at the lowest price, PPP procurement requires 

governments to do only the basic design and engineering, because the tender is for 

delivery of the outputs rather than delivery of the facilities. Private sector providers complete 

the design and engineering, indicating their planned approach in their proposals, and 

demonstrate how this approach will comply with the service delivery requirements. This 

infuses private sector innovation into the project design. In PPP contracting, there are 

often the terms: (a) Outputs; and (b) Service Delivery Standards. 

Although private sector innovation is encouraged in PPP procurement, government still 

has the responsibility of preparing a baseline project design, along with pre-feasibility 

and feasibility studies to demonstrate basic due diligence and to forecast the financial 

performance of the project. A pre-feasibility study is sufficient to begin the process, with 

a Request for Qualification (RFQ), but by the time the Request for Proposals (RFP) is 

issued, a complete feasibility study should have been completed to ensure that any data 

derived from prior reports has been updated and to ensure that government has 

completed enough of its due diligence and analysis to be reasonably assured that the 

information in the RFP is accurate. Inaccurate information in an RFP can later lead to 

contract disputes. 

Detailed provisions regarding PPP procurement are provided in the Regulations 

pertaining to the PPP Act. In applying those provisions, stakeholders are reminded to 

adhere to these principles: 



Final Report 

Fairness – the procurement process must be fair to all parties, i.e. the rights of all 

parties must be protected at each stage of procurement, and then in contract 

management; 

Transparency – the procurement process must keep as much information as possible 

in the public domain, and as much information as practicable must be shared equally 

with all bidders, especially the methodology for selection; 

Competition – in order to avoid possible conflict of interest, and in order to ensure 

that the most qualified bidder is selected, the procurement process must provide 

competition sufficient to ensure that vested interests and/or corruption do not 

influence selection; and 

Accountability – decisions made by the parties must be open to review by 

stakeholders, and decision makers must be held accountable for their decisions. 



Final Report 

Model Request for Qualifications (RFQ) 

Independent Power Producer (IPP) Project 

Pre-Qualification Information and 

Instructions to Potential Applicants 

1. Scope of Bid 

1.1. Public Power Company (PPC) hereby invites applications for prequalification 

from interested parties for the generation and supply of electricity to PPC, 

through the development on a Build-Own-Operate (“BOO”) basis the ____ Plant 

Project, of ____ MW ± 10 % and its associated Transmission Line (“Special 

Facility”), located in _____ area, Malawi. The plant will be connected via double 

phi connection to the existing _____ Substation, or to a future ____ Substation. 

1.2. PPC intends to purchase the electric capacity and associated energy generated 

by the above mentioned Project, which is offered to private sector IPPs to be 

selected through a competitive bidding process. The Project’s ___ kV 

Transmission Lines and associated substation, including expansion bay of PPC 

existing substation, shall be built by the Developer and transferred to PPC as a 

special facility. 

1.3. PPC intends to prequalify parties to undertake the design, engineering, financing, 

procurement, construction, Uniting, operation, and maintenance of the abovementioned 

Project. The period of operation shall be not less than ___ years. 

2. General 

2.1 Prequalification is open to interested parties, either domestic or foreign, provided 

that in the opinion of their auditors they are financially healthy, and their financial 

statements are prepared in accordance with Generally Accepted Accounting 

Procedures. 

2.2 The Applicant shall be a party, or parties forming a consortium. Each such party 

shall be a properly constituted company, corporation, firm, joint venture or other 

legal entity, whether or not having separate legal personality, duly organized and 

existing and registered under the laws of its country. 

2.3 Only Applicants that have been prequalified under the procedure described in 

this document will be invited to bid. Applicants meeting or exceeding the 

Qualification Criteria specified in this document will be prequalified. Applicants 

must continue to meet or exceed the Qualification Criteria at all times during the 

tender process. If changes affecting an Applicant or its constituent members, 

result in it no longer meeting the Qualification Criteria, the Applicant’s 

prequalification shall be terminated. 



Final Report 

2.4 Applicants who pre-qualified for the _________ Project will be automatically prequalified 

for this Project, provided that: 

 

 

Filled in Form 7 and Form 6 (if any) are attached; and 

The Applicant is identical to that of the ________ Project prequalification, 

in terms of consortium members and share composition. 

2.5 Applicants operating an existing IPP in Malawi of a size not less than 300 MW 

will be automatically pre-qualified for this project, provided that: 

 

 

Filled in Form 2, Form 3, Form 6, and Form 8 are attached; and 

The Applicant is identical to the owner of the existing IPP in terms of 

the consortium members and share composition. 

2.6 General information about the Project is provided in Section 4 herein. The 

Request for Proposals will include details of the Project, including the model 

of PPA that the Project Company will be required to enter into with PPC. 

2.7 PPC reserves the right to: 

(a) 

(b) 

(c) 

amend the scope of the Project; 

reject or accept any application; and 

cancel the prequalification process and reject all applications. 

PPC shall neither be liable for any such actions nor be under any obligation 

to inform the Applicant of the grounds for its actions as described in this 

section. 

3. Submission of Applications 

3.1 Applications for prequalification must be either delivered by hand or by 

registered mail, to the following address: 

PPC 

IPP Tender Committee 

Address 1 

Address 2 

Address 3 

Malawi 

Fax: 

not later than 16:00 _______Time on _______ , 200_. 

and be clearly marked “Application to prequalify for Development of the 

_________ Project. ” Applications received by PPC after the time stipulated 

above shall be rejected. 



Final Report 

3.2 The package to be submitted to PPC must include the name of contact person 

and mailing address, and office phone/facsimile number of the Applicant. All 

responses must be in English. 

3.3 Failure to provide information deemed by PPC as essential to evaluate the 

Applicant’s qualifications, or failure to provide timely clarification or substantiation 

of the information supplied, may result in disqualification of the Applicant. 

3.4 The results of the prequalification process shall be announced within 15 days 

after the closing date for the submission of applications. The decision of the IPP 

Tender Committee shall be final. 

3.5 Each applicant shall bear all his own costs relating to any of its activities 

associated with participation in the prequalification or the bidding process. 

4. Information for Applicant 

4.1 The Project is to be a _____ fired _____ power plant of _____ MW ± 10% Net 

Output to the grid and associated ____ kV transmission lines / substation. 

4.2 The Project Company shall sell electric capacity and associated energy to PPC 

under the terms of the Power Purchase Agreement (PPA). The facilities are 

expected to be in operation as soon as practicable but not later than 

_____________. 

4.3 In accordance with the PPA the Project Company shall: 

 

 

Prepare an Environmental Impact Analysis, Environmental Management 

Plan, and Environmental Monitoring Plan and comply with legal 

requirements and environmental requirements; 

Apply and obtain appropriate permits and licenses from the responsible 

authorities, 

Prepare design, and procure power plant and equipment, construct the 

Facility and related infrastructure, and Unit the Facility; 

 

 

 

Own, operate and maintain the Facility for the term of the agreement and 

receive revenues from the sale of electricity to PPC; 

Arrange for supply of fuel; and 

Arrange for the construction of the substation at the power plant side and 

associated T/L to via double phi connection to existing ___ kV T/L 

__________ or to PPC future ____ kV ___________ Substation. The 

interconnection point will be at the ___ kV PPC dead end tower or 

through double phi connection. Associated transmission lines and 

additional bays in future ___ kV _______ Substation shall be built by 

Project Company as a Special Facility. 



Final Report 

5. Qualification Criteria 

5.1 Prequalification will be based on meeting the minimum pass/fail criteria in any 

one of the categories specified below, as well as on achieving an overall score 

higher than the specified minimum score. The three categories represent the 

Applicant’s ability to develop IPP projects, its power generation experience, and 

its financial strength. 

5.2 An Applicant’s score will be based on its responses to this prequalification 

document as contained in the forms attached to the Letter of Application (refer 

Form 1 up to Form 6). 

5.3 Prequalification will be based on the Applicant’s performance in the three stated 

categories (see below). The Applicant shall meet the required prequalification 

standards by completing the attached forms in respect of each category. 

5.4 IPP Development Track record – The Applicant shall demonstrate a track 

record of successfully financing and developing IPP projects on a BOO basis for 

projects of comparable scale and complexity as the subject Project with capital 

size of not less than USD ___ million. The Applicant shall set out its general BOO 

experience in the format provided in Form 4. 

5.5 Power Plant Experience – The Applicant shall have sufficient experience as 

EPC Contractor, or principle plant Supplier, or operating successfully power 

plants of size minimum ___ MW each unit for ___ fired plant or ___ MW per unit / 

___ MW per block for non ___ fired plant. The Applicant shall set out its particular 

experience in power generation projects in format provided in Form 5. 

5.6 Financial Strength – The Applicant’s financial capability shall be sound and 

satisfactory and will be evaluated in terms of net assets and net profit. A copy of 

its audited financial statements together with audit opinion (including a translation 

into USD equivalent) for the last 2 years shall be submitted and must 

demonstrate the soundness of the Applicant’s financial position. Where 

necessary, PPC will make inquiries with the Applicant’s bankers with the 

Applicant’s consent. The Applicant shall set out its financial position in the format 

provided in Form 6. The Applicant shall have net profit of minimum USD ___ 

Million p.a. and total assets of not less than USD ___ Million for a consortium. 

5.7 Scoring Points 

Evaluations for prequalification will be performed in two (2) stages, firstly pass 

and fail evaluation, secondly scoring criteria. To pre-qualify, the Applicant must 

pass both evaluations. 

For Stage 1: Pass and Fail Criteria, the Applicant, either single applicant or total 

of the consortium, shall pass the minimum requirement for the following three 

categories: (i) IPP Development Track Record, (ii) Power-Plant Experience, and 

(iii) Financial Strength. 



Final Report 

The Applicant, having qualified for Stage 1 criteria, will proceed to the Stage 2 

criteria. Each Applicant’s performance will be scored under three “Categories”, 

with categories being subdivided into several “Factors.” A hierarchical scoring will 

then be used to determine the Applicant’s score. 

6. Documents to Accompany Prequalification Application 

The Applicant shall submit the following documents to comply with 

prequalification requirements. As applicable, such documents must be provided 

in respect of each legal entity or person being a member of its bidding 

consortium. The forms shall be completed and initialed by the person signing the 

documents. 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

Letter of Application (Form 1) signed by the legally authorized 

representative of the Applicant and duly completed. 

Forms 2 to 6 inclusive, duly completed with supporting documentation 

provided as requested or as required to support the information 

provided. 

Certificate prepared by a competent authority verifying the legal status 

of the Applicant. 

Copy of a power of attorney, giving the person filing the 

prequalification application authorization to submit the documents to 

PPC on behalf of the Applicant or the bidding consortium, as the case 

may be, 

Statement certifying that the Applicant has no material overdue debts 

of any kind towards the tax authorities, the customs, or any statutory 

dues in Malawi. 

Statement certifying that the Applicant is not currently involved in 

bankruptcy or restructuring proceedings of any sort. 

(g) Financial statements of the Applicant for the most recent three (3) 

fiscal years, audited by duly licensed chartered or public accountants, 

and an opinion letter from the accountants indicating that the financial 

statements accurately reflect the financial condition of the Applicant 

as of the dates of the financial statements. 

(h) 

(i) 

(j) 

Other documents the Applicant considers important to demonstrate its 

ability and confirms its capacity to undertake the Project. 

The Applicant shall provide information about each and every member 

of the consortium bidding for the project. 

The Applicants who pre-qualified for _______ pre-qualification shall 

submit Form 7 and Form 6, as necessary. 



Final Report 

(k) 

An Applicant who owns an existing IPP of not less than ___ MW per 

unit in Malawi shall submit Form 2, Form 3, Form 6, and Form 8. 

7 Updating Prequalification Information 

At the time of submitting its bid, the Prequalified Applicant shall be required to 

update the financial information used for prequalification to confirm its 

continued compliance with the qualification criteria and verification of the 

information provided. A bid will be rejected if the Applicant’s qualification 

thresholds are no longer met at the time of bidding. 



Final Report 

Model Request for Proposals (RFP) 

Public Power Company (PPC) 

REQUEST FOR PROPOSALS 

FOR THE DEVELOPMENT OF 

_______ ____ FIRED _____ POWER PLANT 

_______ MW _______, Malawi 

This Request for Proposal comprises 2 [two] volumes, which, along with their annexes, 

schedules, and exhibits, shall be referred to as the “Request for Proposal Document” or “RFP” 



Final Report 

Contents of RFP 

PART 1 : 

PART 2 : 

PART 3 : 

Bid Document 

Model PPA (Provided under 

Separate Cover 

Sample of Levelized Tariff 

Calculation 



Final Report 

DISCLAIMER 

This RFP has been prepared in compliance with PPC’s Guidelines for developing and 

managing Private Sector Infrastructure Projects, and follows relevant Government’s Guidelines. 

PPC in good faith furnishes the information given in this RFP. PPC disclaims all or any 

responsibility whatsoever to anyone for information contained in this RFP or for any 

representation or statement herein, whether expressed or implied. 

Without prejudice to the generality of the foregoing, this RFP does not contain, nor does PPC, 

any Instrumentality of the Government of Malawi (“Government Instrumentality”) or their 

Representatives, make any promise, representation or warranty whatsoever, whether 

expressed or implied (and no such Representatives have any authority to make such 

representations and warranties), that information contained in this RFP is accurate, complete or 

reasonable or that it constitutes all the information necessary to prepare a Proposal or develop 

the Plant. 

All such persons expressly disavow any obligation or duty (whether in contract, tort or 

otherwise) to any Bidder and disclaim any and all liability based on or relating to any such 

information or representations or warranties (expressed or implied) contained in, or errors or 

omissions from, this RFP or based on or relating to the use of this RFP or any other written or 

oral communication transmitted to or information provided to or otherwise acquired by a 

Bidder. 

Each Bidder accepts full responsibility for conducting an independent analysis of the feasibility 

of the Plant and for gathering and presenting all necessary information. No Bidder is entitled to 

rely on the involvement of PPC, any Government Instrumentality or their Representatives in 

the preparation of this RFP or in the solicitation process as a basis for bidding on or developing 

the Plant. Except as otherwise stated, the information provided in this RFP shall form no part 

of the Model PPA or any other document defining the agreements with PPC and Government 

Instrumentalities, or of any Proposal submitted in response to this RFP. No adjustments will be 

made to any Proposal, or to any agreements between PPC and Government Instrumentalities 

based on a Bidder’s interpretation of the information provided. 

In submitting a Proposal in response to this RFP, the Bidder certifies that it understands, accepts 

and agrees to the disclaimers on this page. Nothing contained in any other provision of the 

RFP, nor any statement made orally or in writing by any person or party shall have the effect of 

negating or superseding any of the disclaimers on this page. 

Queries relating to the information contained in this RFP shall be directed only to the contact 

persons referred to herein in the circumstances stated. No other person, whether employee, 

agent, adviser or other, has been authorised to give any information or to make any 

representations in respect of the RFP or the project and, if given or made, such information or 

representation may not be relied upon as having been authorised by PPC or any Government 

Instrumentality. 

This RFP is confidential and personal to the Bidders, it is provided on the understanding that 

it is not to be duplicated or distributed to any other person. 



Final Report 

Public Power Company 

REQUEST FOR PROPOSALS FOR THE DEVELOPMENT OF 

_______ MW ________ MW _______ ____ FIRED _____ POWER PLANT 

BID DOCUMENT 

CONTENTS: 

1. INFORMATION FOR BIDDERS ......................................................................................... 165 

1.1 Overview of the Bid Solicitation ....................................................................................... 165 

1.1.1 Solicitation for the Concession .......................................................................... 165 

1.1.2 RFP Document .................................................................................................. 165 

1.2 Generation Planning ........................................................................................................ 165 

1.3 Institutional Framework .................................................................................................... 166 

1.3.1 Private Sector Participation ............................................................................... 166 

1.4 Government Support ....................................................................................................... 166 

2. PROJECT DESCRIPTION ...................................................................................................... 6 

2.1 The Plant ............................................................................................................................. 6 

2.1.1 General .................................................................................................................. 6 

2.1.2 Station Load Profile ............................................................................................... 6 

2.1.3 Generating Plant Location ................................................................................. 167 

2.1.4 Coal Supply ....................................................................................................... 167 

2.2 The Plant Site ...................................................................................................................... 7 

2.2.1 Description of the Plant Site .................................................................................. 7 

2.2.2 Plant Site Layout ................................................................................................... 7 

2.2.3 Plant Site Utilities ................................................................................................... 8 

2.3 Environmental and Permitting Considerations .................................................................... 8 

3. MODEL POWER PURCHASE AGREEMENT (PPA) ............................................................. 9 

3.1 Introduction .......................................................................................................................... 9 

3.2 Overview of Model PPA ....................................................................................................... 9 

3.2.1 General .................................................................................................................. 9 

3.2.2 The Power Purchase Agreement .......................................................................... 9 

4. INSTRUCTIONS TO BIDDERS ............................................................................................ 10 

4.1 Introduction ........................................................................................................................ 10 

4.1.1 Bidding Environment ........................................................................................... 11 

4.1.2 Tender Committee ............................................................................................... 11 

4.2 Description of Solicitation .................................................................................................. 11 

4.2.1 Selection Process ................................................................................................ 11 

4.2.2 Solicitation Timetable .......................................................................................... 12 

4.3 Pre-Bid Meeting ................................................................................................................. 13 

4.3.1 Pre-Bid Meeting ................................................................................................... 13 

4.4 Clarifications and Amendments ......................................................................................... 13 

4.4.1 Requests for Clarifications ................................................................................... 13 



Final Report 

4.4.2 Amendments to the RFP - General ..................................................................... 14 

4.4.3 Amendments to Model PPA ................................................................................ 14 

4.5 Bidders ............................................................................................................................... 15 

4.5.1 General ................................................................................................................ 15 

4.5.2 Bidder Prerequisites ............................................................................................ 15 

4.5.3 Consortiums ......................................................................................................... 16 

4.6 Proposals - General ........................................................................................................... 16 

4.6.1 Proposal Responsiveness ................................................................................... 16 

4.6.2 Alternative Proposals ........................................................................................... 16 

4.7 Proposal Structure and Content ........................................................................................ 17 

4.7.1 Language of the Proposal ................................................................................... 17 

4.7.2 Proposal Structure ............................................................................................... 17 

4.7.3 Proposal Preparation ........................................................................................... 18 

4.7.4 Bidder’s Duty to Inform Itself ............................................................................... 18 

4.7.5 Mandatory Proposal Requirements ................................................................... 180 

4.7.6 Cost and Risk of Proposals ................................................................................. 20 

4.7.7 Interest and Exchange Rate Movements ............................................................ 20 

4.8 Proposal Validity ................................................................................................................ 21 

4.9 Securities ........................................................................................................................... 21 

4.9.1 Bid Security .......................................................................................................... 21 

4.9.2 Project Securities ................................................................................................. 22 

4.10 Submission of Proposal ..................................................................................................... 22 

4.10.1 Authorisation ........................................................................................................ 22 

4.10.2 Format, Sealing and Marking .............................................................................. 22 

4.10.3 Modification and Withdrawal of Proposal ............................................................ 24 

4.10.4 Bid Closing ........................................................................................................... 25 

4.10.5 Late Proposals ..................................................................................................... 25 

4.11 Proposal Opening .............................................................................................................. 25 

4.11.1 Administrative & Technical Proposals ................................................................. 25 

4.11.2 Price Proposals ................................................................................................... 25 

4.12 Confidentiality .................................................................................................................... 26 

5. PROPOSAL REQUIREMENTS ............................................................................................ 26 

5.1 General .............................................................................................................................. 26 

5.2 Administrative & Technical Proposal ................................................................................. 26 

5.2.1 Presentation......................................................................................................... 26 

5.2.2 Project Technical Details ..................................................................................... 27 

5.2.3 Target Availability ................................................................................................ 29 

5.2.4 Organisation Plans .............................................................................................. 29 

5.2.5 Intentionally Left Blank ........................................................................................ 29 

5.2.6 Insurance Plan ..................................................................................................... 29 

5.2.7 Domestic Participation ......................................................................................... 29 

5.2.8 Services and Utilities ........................................................................................... 29 

5.2.9 Environmental Obligations ................................................................................... 30 

5.2.10 Project Milestones Schedule ............................................................................... 30 

5.3 Price Proposal ................................................................................................................... 30 

5.3.1 Presentation......................................................................................................... 30 

5.3.2 Tariff ..................................................................................................................... 31 

5.3.3 Cash Flow ............................................................................................................ 32 

5.3.4 Project Cost ......................................................................................................... 32 


5.3.6 Electricity Payments and Supporting Cost Data .................................................. 32 

5.3.7 Deviations from the Model PPA ........................................................................... 32 

5.4 Proposal Letters and Forms .............................................................................................. 33 

5.4.1 Introductory Notes ............................................................................................... 33 

5.4.2 Inclusions in the Proposal .................................................................................... 33 



Final Report 

6. EVALUATION PROCEDURE ............................................................................................... 33 

6.1 Outline of Evaluation Procedure ........................................................................................ 33 

6.2 Clarification of Proposals ................................................................................................... 34 

6.3 Right to Reject Proposals .................................................................................................. 34 

6.4 First Step Evaluation: Administrative ................................................................................. 34 

6.5 First Step Evaluation: Technical ........................................................................................ 36 

6.5.1 Compliance with Minimum Functional Specification ........................................... 36 


6.5.3 Technical Non-compliances ................................................................................ 37 

6.6 Second Step Evaluation: Price Proposal ........................................................................... 37 

6.6.1 Responsiveness of Price Proposal ...................................................................... 37 

6.6.2 Correction of Errors ............................................................................................. 38 

6.6.3 Assessment and Ranking .................................................................................... 38 

6.7 Short-listing and Award ...................................................................................................... 38 

6.8 Cost of Finalising Model PPA ............................................................................................ 39 



Final Report 

LIST OF ANNEXES: 

ANNEX I: 

ANNEX II: 

ANNEX III: 

ANNEX IV: 

ANNEX V: 

ANNEX VI: 

ANNEX VII: 

Definitions and Interpretation 

Form of Bid Security 

Responsiveness Evaluation 

Intentionally Left Blank 

Proposed Amendments to Model PPA 

Clarifications Form 

Intentionally Left Blank 

LIST OF FORMS: 

A. ADMINISTRATIVE & TECHNICAL PROPOSAL FORMS 

FORM A :A: 

FORM B :B: 

FORM C :C: 

FORM D :D: 

FORM E :E: 

FORM H :H: 

Administrative & Technical Proposal Letter 

Qualifications of the Bidder 

Project Milestones Schedule 

Technical Data 

Bidder’s Organisation Plans 

Deviations to the Model PPA 

B. FINANCIAL PROPOSAL FORMS 

FORM G :G: 

FORM I :I: 

Price Proposal Letters 

Price Structure Data 



Final Report 

INFORMATION FOR BIDDERS 

Overview of the Bid Solicitation 

Solicitation for the Concession 

PPC is promoting the development of the Plant (as defined in 2.1.1 below) as a private 

sector project and will award a Build-Own-Operate (BOO) concession to develop and 

operate the Plant to a private operator. Proposals are invited from interested 

prequalified parties. The proposals will be evaluated, and the Model PPA executed, in 

accordance with the terms and conditions of this Request for Proposals (RFP) document. 

PPC, in its evaluation of Proposals, will place emphasis on the offered tariff but, to 

ensure an expeditious solicitation and award process, Proposals will also enjoy favour 

according to their adherence to the RFP. The process of bidding, finalising of Model 

PPA, evaluation of Proposals, and award of concession is described in Sections 4 and 6 

The Bidder, if successful, together with PPC through its subsidiary, shall establish a 

project company (the Seller) that will finance, design, procure, construct, test, Unit, 

operate, and maintain the Plant. 

RFP Document 

Except where the context requires otherwise, this Part 1 will be interpreted in accordance with the 

rules set out in Annex I–1, and words and expressions will have the meanings given in Annex I– 

2. The RFP comprises: 

Bid Document Part 1 

Model PPA Part 2 

Sample of Levelized Tariff Calculation Part 3 

PPC for the purpose of soliciting Proposals from pre-qualified parties has made the RFP to 

embody commercial values and risk allocations consistent with the interests of investors and 

their lenders contemplating limited-recourse financing of the Project. 

While PPC considers the assumptions made in preparing this RFP to be reasonable, whether to 

rely on them in preparing Proposals is a matter solely for the Bidders to judge and neither PPC 

nor any Government Instrumentality nor their Representatives shall take responsibility for the 

Bidders’ decisions. Bids shall be made at the Bidder’s sole cost and risk and the finalisation and 

execution of the Model PPA will be at the sole cost and risk of the successful Bidder. 

Generation Planning 

The Plant is designed to meet PPC’s Long Term Generation Expansion Plan (LTGEP). 

PPC’s generation expansion plans are prepared annually and are available to the 

Bidders on request. Bidders are cautioned that, in the event that prices and/or demand 



Final Report 

for electricity in the future deviates substantially from the levels projected in the LTGEP, 

the ability of PPC to purchase all of the output of the Plant, at projected price levels, 

could be compromised. This represents a form of commercial risk that is 100% allocated 

to the private operator of the Plant. 

Institutional Framework 

The power sector in Malawi is organised under the Ministry of Energy and Mineral 

Resources. The State-Owned Power Company SPC has historically been responsible for 

the majority of Malawi’s generation and was the monopoly provider of transmission, 

distribution, and retail supply of electricity in Malawi. 

Under the Electricity Law and other legislation, the Indonesian electricity industry is 

being reformed. SPC is being restructured with generation being provided by separate 

companies. Devolution of authority is planned with SPC being restructured into 

strategic business units with considerable discretion over operations and capital 

investment. 

PPC is a separate legal entity from SPC, but its ownership is substantially or in part SPC 

and it is therefore subject to SPC influence over its decisions, and may from time-to-time 

find it necessary to request assistance from SPC to meet its contractual obligations under 

this and other Power Purchase Agreements (PPAs). 

Private Sector Participation 

The private sector has been playing, and is expected to continue to play, an increasing 

role in power sector development activities. To date, IPP projects totalling around ____ 

MW have been implemented, and there is significant privately owned captive capacity 

installed throughout the country. 

In financing IPP projects, developers are customarily required to contribute equity of at 

least 30% of total project cost. It is understood that developers will raise the balance of 

the money required for their projects from a range of sources including commercial 

banks, export credit agencies, infrastructure investment funds and other international or 

domestic financial institutions. 

To attract interest from proven and reputable developers, due regard is given to their 

right to a reasonable return on their investment and to the legitimate security interests of 

their lenders. These factors are reflected in the terms of this RFP. 

Government Support 

PPC intends the Project to be financed without any direct or indirect Government 

guarantees. The Seller’s financiers must look to revenues earned through the effective 

and efficient operation of the Plant for returns on investment and the service of debt. 

Accordingly, Bidders’ Proposals shall not assume or rely on any privileges, concessions 

or guarantees from the Government or Government Instrumentalities. Any assumptions 

made by any bidder in preparing their bid to the contrary may be regarded as a material 

deviation and may result in the rejection of the Proposal. 



Final Report 

PROJECT DESCRIPTION 

The Plant 

General 

This RFP solicits Proposals from Bidders for the financing, design, procurement, 

construction, Uniting, operation, and maintenance of a ____ Fired ____ Power Plant in 

________, Malawi along with support facilities (the “Plant”). 

The project is expected to commence operation in Year ____. 

The Plant shall comply with the relevant Minimum Functional Specifications, as 

specified in thein this PPA. 

Station Load Profile 

The Plant is intended for base load operation. The Plant will be required to operate 

according to Dispatch Instructions from by PPC Load Dispatch Center _______, which 

will dispatch the Plant according to merit order dispatch procedures. 

Generating Plant Location and Interconnection 

The location of the Plant is at Bidder’s discretion, but should be in close proximity to 

PPC Grid. High voltage transmission of electricity is carried out at 150 kV. The Plant is 

to be interconnected to : 

As part of the Plant, the Seller shall provide an on-site 150 kV Substation and a Special 

Facilities including transmission line Interconnection Point as required for 

interconnecting the Plant to PPC System. The Bidders shall prepare the drawing 

showing (i) the location of Connection Point and Metering Point (ii) an electrical single 

line diagram showing the Connection and metering arrangement. 

Any connection point of the Plant to PPC system shall be consulted and approved in 

writing by PPC Load Dispatch Center. 

Fuel Supply 

The Seller shall be responsible for arranging and maintaining a reliable coal supply for 

the Plant to enable it to meet its obligations under the Model PPA. The Seller shall have 

complete discretion over the type of coal it uses, including securing supplies from 



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primary and secondary coal suppliers. All responsibilities, costs and risks associated 

with the development of infrastructure, purchasing, delivery, storage and use of coal 

shall be borne by the Seller. 

The Plant Site 

Description of the Plant Site 

1 x 600 MW 

Estimated COD 2009/10, 

Plant site is to be determined by the Bidders, but should be in the area in general 

vicinity of _______ as described herein. 

Plant Site Layout 

The Plant Site comprises the following elements: 

(i) 

(ii) 

The power station block, occupying a section of land in respect of which the Seller will 

have exclusive use for constructing and operating the Plant; 

The Plant Site Services Corridors, being the corridors of land in respect of which the 

Seller will have rights-of-way for the purposes of locating site services including cooling 

water conduits, coal handling facility, fly-ash dumping area, and electrical cabling. 

The Bidders shall prepare a Preliminary Plant Site Plan which would show indicative plant and 

building layouts to guide Bidders in locating and orienting their Plants to optimise the use of the 

land with other possible land uses within or adjacent to the Plant Site. PPC reserves the right to 

refine the Site Plant if required before finalising the Model PPA. 

Plant Site Utilities 

The Seller may apply to PPC for a 20 kV connection to the Plant Site for power during 

the Construction Phase if available, or Seller may provide its own construction power. 

The connection would be made and power supplied on the same terms and conditions 

as apply at the time for applicable PPC’s consumers Tariff. 

Environmental and Permitting Considerations 

The Model PPA will bind the Seller to meet the Environmental Standards as set out in 

the Legal Requirements and in the Environmental Assessment and Management Plan. 

Bidders shall inform themselves of the full extent of such requirements. Bidders shall 

assess the likely impacts of their proposed Plant and make due allowance in their 

Proposal for, amongst others, the costs of :of: 



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preparing all studies required pursuant to the Legal Requirements, including the 

Environmental Assessment and Management Plan; 

obtaining and maintaining all required approvals, consents, permits and licenses 

including those set out in Appendix Q of the Model PPA; 

meeting or exceeding all Environmental Requirements and Standards as set out 

in Appendix N of the Model PPA; 

Bidders shall base their environmental assessments on the type and specification of coal 

they propose to burn over the Operating Phase of the PPA. 

Data related to the preparation of the Environmental Assessment and Management Plan 

may be obtained from the Government Instrumentalities. 



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MODEL POWER PURCHASE AGREEMENT (PPA) 

Introduction 

Following preparation and evaluation of Proposals, the successful Bidder will enter into 

the Power Purchase Agreement with PPC. 

The Model PPA is interdependent, with interlocking, back-to-back provisions to transfer 

project risks to the parties according to the risk allocation expectations of the market. 

Subject to a party exercising early termination rights or the Term being extended or 

reduced in accordance with the provisions of the Model PPA, termination will occur on 

the thirtieth anniversary of the Commercial Operation Date. 

The Model PPA shall be governed by and interpreted in accordance with the Indonesian 

law. Disputes not amicably resolved shall be referred to the agreed expert. 

Overview of Model PPA 

General 

The following paragraphs of this Section 3.2 list some features of the Model PPA. The 

list is intended only as an introduction and shall not take precedence over the Model 

PPA. 

The Power Purchase Agreement 

The parties to the PPA are the Seller and PPC. The PPA relates to the sale and purchase 

of capacity and energy from the Plant and provides for, amongst others: 

 

 

 

 

Division of the PPA Term into a Preliminary Phase, a Construction Phase and an 

Operating Phase; 

Satisfaction of the Conditions Precedent, including provision of the Performance 

Security Stage I and Performance Security Stage II (Performance Security), and 

achieving Financial Close, by the specified Financing Date; 

Preliminary Phase obligations of the Seller, include: 

- execution of the Project Documents; 

- preparation of Preliminary Special Design; 

- preparation of the Health and Safety Plan and Environmental Assessment 

and Management Plan. 

Construction Phase obligations of the Seller, include: 

- construction of the Plant in accordance with the Minimum Functional 

Specifications; 

- construction of the Interconnection Facilities; 



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- construction of the Special Facilities; 

- energising, synchronising, Uniting and testing the Plant; 

- implementing the Health and Safety Plan and Environmental Assessment 

and Management Plan 

 

 

 

 

 

 

Operation Phase obligations of the Seller, include: 

- operating and maintaining the Plant; 

- complying with Operating and Dispatch Procedures and Rules, and 

Dispatch Instructions; 

Exclusive right of PPC (or its successor) as Buyer to purchase capacity and 

electrical energy from the Plant throughout the Operating Phase. 

Liquidated damages for: 

- failure to achieve the Required Commercial Operation Date; 

- breach of performance warranties 

Payments to the Seller including: 

- Capacity payment; 

- Energy Payment 

- Start-Up Allowances. 

Obligation of the Seller to maintain specified insurances; 

Provision for early termination in specified circumstances with buy-out. 

INSTRUCTIONS TO BIDDERS 

Introduction 

Bidding Environment 

Generation to be provided by the Plant is a key component of PPC’s Long Term 

Generation Expansion Plan for the Java Grid and the failure to complete the Project by 

the Required Commercial Operation Date would result in the dispatch of higher cost 

generation. 

The bidding and award procedures and evaluation criteria have been structured to 

maximise the likelihood of achieving the Project milestone dates. Proposals that promise 

a smooth, swift and assured process for executing the Model PPA and achieving 

Financial Closure will be favoured. 



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Tender Committee 

A Tender Committee has been established by PPC to guide the Project through the 

process of pre-qualifying parties, soliciting bids, evaluating Proposals, and finalising the 

Model PPA. 

The Tender Committee reports to PPC’s Director of Generation and Primary Energy. 

Description of Solicitation 

Selection Process 

The following provides an overview of the intended process by which the successful 

Bidder will be selected: 

1. PPC has prequalified a number of parties who meet the Prequalification Criteria 

and are invited to submit Proposals in response to this RFP. 

2. A Pre-Bid Meeting will be held to clarify issues and answer questions on any 

matter related to implementation of the Project. 

3. Bidders shall submit their Proposals by Bid Closing, being the date as specified in 

the RFP. Save any non-material deviations notified in Section H, Proposals shall 

conform to the RFP. 

4. Bids Proposals shall be submitted in two-envelopes system , where the first 

Envelope is the Administrative & Technical Proposal including Bid Security, 

while the second envelope is the Price Proposal as detailed in Section [6]. 

Written clarification may be conducted during the above process as considered 

necessary by PPC. 

5. On completion of the evaluation, the Tender Committee will prepare a 

recommendation for PPC’s Board of Directors (BOD) approval proposing: 

The three top-ranked Bidders with the lowest prices are short-listed; and 

The Bidder ranked first is the preferred Bidder and will be invited to 

discuss and to finalise Model Power Purchase Agreement (PPA). 

6. After approval by PPC’s BOD and after the objection period ,a Letter of Intent 

will be issued to the preferred Bidder. Upon counter-signing the Letter of Intent, 

the preferred Bidder will be invited to enter into discussions with PPC to finalise 

the PPA. If discussions with the preferred Bidder are unsuccessful or are not 

making satisfactory progress, the next-ranked from the top ranked Bidders will 

be invited to enter into discussions with PPC with a view to finalise the PPA. 

7. Upon successfully concluding discussions, the successful Bidder will be awarded 

the Project and will: 



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execute the PPA; 

submit Performance Security Stage I valid up to the Financing Date; 

fulfil the Conditions Precedent in the PPA. 

prior to the Financing Date, submit Performance Security Stage II valid up 

to the COD; 

8. If the Conditions Precedent have not been met by the Financing DateFinancing 

Date has not met the Conditions Precedent, PPC may terminate the PPA and be 

paid the full amount of the Performance Security Stage I specified in item (7) 

above (refer Schedule 4 of PPA). 

Solicitation Timetable 

The timetable for solicitation, submission and evaluation of Proposals, execution of the 

Model PPA are as follows: 

Issuance of RFP 

Pre-Bid Meeting 

Issuance of Minutes of Pre-Bid Meeting 

Final submission of clarifications 

Final responses to clarifications 

Bid Closing (for all Proposals) 

- Bid Opening of Administration and Technical Proposal 

- Bid Opening of Price Proposal 

Announcement of the successful Bidder 

Objection period 

Issuance letter of intent to the successful Bidder 

Discussion and Finalisation of PPA 

Approval Process to respective Authorities 

Signature of PPA 

Financial Closing 

Commercial Operation Date 

Note : The above date subject to change (if required) which), which will be notified in writing to all 

Bidders. 

Pre-Bid Meeting 

Pre-Bid Meeting and site visit will be held at a place designated by PPC. 

At least one senior representative of each Bidder is expected (but is not obliged) 

to attend the Pre-Bid Meeting. Non-attendance at the Pre-Bid Meeting will not be 

a cause for disqualification of the Bidder. Bidders are asked to confirm their 

attendance in writing to the Tender Committee at least three (3) days before the 

meeting and to give the names of proposed attendees. 



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The purpose of the Pre-Bid Meeting will be to answer questions Bidders may 

have concerning technical matters, contractual issues and the bidding and 

selection processes. Bidders are asked to submit their questions by way of a 

request for clarification in accordance with Section 4.4. Provided they are 

received no later than 4 (four) Business Days before the Pre-Bid Meeting, such 

questions will receive a response at the meeting. PPC may reserve its position on 

any questions or requests for clarification made at the Pre-Bid Meeting. 

Amendments to the RFP (including the Model PPA) arising from matters raised 

at the Pre-Bid Meeting will be made through the issue of Addenda and not 

through the minutes of the meeting. 

The following will be transmitted without undue delay to all Bidders: 

 

 

 

Minutes of the Pre-Bid Meeting; which includes all questions and requests 

for clarification raised during the Pre-Bid Meeting along with answers. 

Additional Notifications which includes all questions and request for 

clarificationNotifications, which includes all questions and request for 

clarification, raised after Pre-Bid Meeting along with answers. 

Amendments to the RFP if any. 

Any Additional Notifications or Addenda will be issued in accordance with 

Section 4.4. In the case of any discrepancy between any answer given at the Pre- 

Bid Meeting and that confirmed later by Additional Notification or Addendum, 

the Additional Notification or Addendum shall prevail. 

Clarifications and Amendments 

Requests for Clarifications 

Bidders seeking clarification of information in the RFP shall submit their requests in 

writing to the Tender Committee. 

Requests for clarification or interpretation shall be submitted using the form set out in 

_________. The Tender Committee will reply to such requests for clarification or 

interpretation by way of an Additional Notification issued within seven (7) days from 

the date of receipt of the request. Additional Notifications will be sent to all Bidders. 

Bidders are cautioned that no Representative of PPC or any Government Instrumentality 

is authorised to explain or interpret the RFP, and that any interpretation or explanation, 

if not given in the form of an Additional Notification or Addendum, must not be relied 

upon. 

Requests for clarification shall be received no later than four (4) weeks prior to Bid 

Closing for the bids, and no Additional Notification, Addenda or other reply shall be 

made with respect to requests received later than this deadline. 



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Amendments to the RFP - General 

Only amendments to the RFP (including the Model PPA) made by the issuance of 

Addenda by PPC shall be considered binding on PPC. 

PPC may issue Addenda at any time up to three (3) weeks prior to Bid Closing. A copy 

of each Addendum shall be sent to all Bidders, in hard copy as well as soft copy by 

email, on the same date. Bidders shall promptly acknowledge by facsimile or email 

receipt of Addenda and shall note in their Proposals all Addenda received. Late receipt 

of an Addendum by the Bidder or failure to acknowledge receipt thereof shall not 

relieve the Bidder of being bound by such Addendum. 

In order to afford Bidders reasonable time in which to take a clarification or amendment 

into account in preparing their Proposals, PPC may, at its discretion extend the Bid 

Closing in accordance with Section 4.10.4. 

Amendments to Model PPA 

It is important that the Model PPA is executed and the Project expedited without 

protracted negotiation or delay. The Model PPA provided in the RFP is therefore 

written to offer adequate incentives to prospective investors and protection to their 

Lenders. 

Bidders are encouraged to minimise deviations to the Model PPA. Proposals containing 

material deviations to the Model PPA subject to rejection. However, Bidders may seek 

changes to the Model PPA not later than four (4) weeks prior to Bid Closing by 

following the procedures stipulated below. 

If Bidders have concerns with the Project that in their view are not satisfactorily 

addressed in the Model PPA, the Bidders may propose amendments to the Model PPA 

in the format specified in Annex V, “Proposed Amendments to Model PPA”. 

Prior to deciding its response to Bidders’ proposed amendments, PPC may invite 

Bidders, individually or collectively, to discuss the proposed amendments. PPC may, at 

its sole discretion, accept proposed amendments and accepted amendments will be 

incorporated into the Model PPA through Addenda issued pursuant to Section 4.4.2. 

In proposing amendments to the Model PPA, Bidders shall allow sufficient time for the 

Tender Committee to consider such amendments, discuss them with Bidders (if 

appropriate and desirable), determine a response and issue Addenda (if appropriate). 



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Bidder’s Proposals shall be based on the Model PPA as amended by Addenda. Bidders 

are asked to confirm in their Proposal their acceptance of, and willingness to execute, the 

amended Model PPA, save only for non-material deviations as expressly advised in 

Section H of the Bidders’ Proposals. Deviations not notified in the prescribed format 

shall not be considered to be part of a Bidder’s Proposal and the Bidder may not rely on 

them in scooping and pricing the Proposal. 

Bidders 

General 

For the purpose of this RFP generally, a Bidder is any pre-qualified party who has 

received this RFP. The Bidder shall be an individual party, or parties to a bidding 

consortium, each party being a properly constituted company, corporation, firm, joint 

venture or other entity, whether or not having separate legal personality. 

A pre-qualified party or a party as a member of pre-qualified consortium may submit 

only one bid under this RFP. If a party submits more than one bid , singly or in a 

consortium, all Proposals that include that party will be rejected. For the avoidance of 

doubt, this rule will not apply in respect of parties who participate in these bids as a 

supplier or contractor, noror in respect of bids that include contractors or suppliers who 

are proposed by more than one Bidder. 

The successful Bidder shall constitute a Project Company in a form of Limited Liability 

Company according to laws and regulations of Malawi and will be required to enter into 

a PPA with PPC. 

Bidder Prerequisites 

Bidders shall meet the following criteria: 

 

 

Throughout the period up to execution of the Model PPA, Bidders shall continue 

to meet the criteria under which they were pre-qualified. If the Bidder no longer 

meets the prequalification criteria, its prequalification will lapse and it will be 

prevented from further participation in the bid solicitation. The Bidder may add 

to its members if it is a consortium. 

No Bidder, or member of the Bidder’s consortium, or their parent or affiliate 

companies, shall have: 

- suspension or blacklisting imposed on them by PPC or any Government 

Instrumentality for any reason whatsoever, 

- a record of unsatisfactory past performance, including breach of contract, 

untimely completion, poor claims history and defective workmanship, 

- inordinate overdue debts toward the insurance, revenue or customs 

authorities of Malawi or of their country of incorporation, 



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- a record of criminal or civil court cases pending or decided against them 

involving non-payment of tax, duty or other undertaking with PPC or any 

Government Instrumentality. 

Consortiums 

The Bidder, preparing a Proposal as a consortium, joint venture company or other form 

of partnership, shall meet the following conditions: 

 

 

 

 

 

 

 

The Bidder shall identify a lead member who shall undertake to maintain not less 

than twenty five (25) % of the share of the Project Company for a period of not 

less than 5 years from the Commercial Operation Date. The lead member shall 

be responsible for all communications with and for the Bidder. The lead member 

shall submit with the Proposal powers of attorney, in terms acceptable to PPC, 

executed by all members authorising the lead member to execute the Proposal on 

behalf of the consortium. 

The lead member shall also submit resolutions from the Board of Directors of 

each member company authorising that member's participation in the Proposal 

In the case of a company or incorporated joint venture, the Bidder shall provide 

its memorandum and articles of association; in the case of some other form of 

partnership agreement, it shall provide a memorandum amongst its members 

demonstrating their commitment to the Project and stating the proposed equity 

contributions. 

The Proposal shall be signed so as to legally bind all members, jointly and 

severally, and the Proposal shall be submitted with a copy of the consortium 

agreement providing the joint and several liabilities with respect to the Project. 

The Bidder shall include at least one member who shall undertake to maintain 

not less than twenty five (25)% of the share of the Project Company for at least 

5 years from the Commercial Operation Date. 

The Bidder shall provide as part of its Proposal details of the role to be played by 

each of its members, their intended equity commitment and the organisation of 

the proposed project company. 

Once the Bidder has submitted its Proposal and for as long as the Proposal is 

under consideration by PPC, the members may not dispose of their interest in, or 

withdraw from, the bidding consortium prior to execution of the PPA, unless 

with prior consent from PPC. 



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In accordance with Indonesian Investment Regulations, in order for a bidder to 

submit its bid for this tender, the bidder will need to have, demonstrate and 

maintain at least a 5% local shareholding in the bidding consortium. 

Proposals - General 

Proposal Responsiveness 

The Bidder shall submit only one substantially responsive proposal (the Proposal), i.e. 

one that conforms to the terms, conditions and specifications of the RFP without 

material deviation or reservation and otherwise fulfils the mandatory requirements 

specified in Section (4.7.5). Failure to comply with this instruction may result in 

rejection of the Bidder’s Proposal. 

The Bidder may submit no more than one Proposal. 

Bidder’s attention is drawn to the provisions of Section (1.5) and to the Bidder’s need to 

finance the Project without any direct and unconditional Government guarantees save 

those undertakings expressly described in this RFP. 

Alternative Proposals 

Alternative proposals are not acceptable and any such proposals received by the Tender 

Committee will be returned unopened to the Bidder. 

Proposal Structure and Content 

Language of the Proposal 

The Proposal and all related correspondence, communications and documents in 

relation to this RFP shall be in the English language. Supporting documents and printed 

literature furnished by the Bidder with the Proposal may be in any other language and 

may be accepted for reference only, provided they are accompanied by an appropriate 

translation in the English language. Supporting materials that are not translated will not 

be considered. 

Proposal Structure 

Proposals shall comprise two separate parts; an Administrative & Technical Proposal 

and a Price Proposal. Bidders’ Proposals shall include the following documents (refer 

List of Annexes and List of Forms, as appropriate): 

(i) 

Administrative & Technical Proposal Forms 

Bid Security (Annex II) 

Technical Proposal Letter (Form A) 

Qualifications of the Bidders (Form B) 

Project Milestones Schedule (Form C) 



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Technical Data (Form D) 

Bidder’s Organisation Plans (Form E) 

Deviations to the Model Power Purchase (Form H) 

Agreements 

(ii) 

Price Proposal Forms 

Price Proposal Letter (Form G) 

Price Structure Data (Form I) 

Proposal Preparation 

If the Proposal consists of more than one volume, the Bidder shall clearly number the 

constituent volumes and provide an indexed table of contents for each volume. All 

pages of the Proposal shall bear the name of the Bidder. 

The Proposal shall be typed using indelible ink and shall be clearly legible and suitable 

for copying. The person or persons duly authorised to sign for the Bidder shall initial 

each sheet and any erasures or changes. Any erasures and changes that are not signed, 

dated and legible will not be taken into consideration. 

The Bidder shall complete the letters, securities and forms in the format specified in the 

Annexes and Forms and will otherwise provide information required under the RFP in 

the format requested. The Forms (and each sheet thereof) shall be initialled by the 

signatories (if more than one) of the Proposal letters. Signatures and initials shall be in 

black indelible ink. 

Technical data as well as dimensions and measurements on the drawings submitted 

with the Proposal shall be quoted in SI units. 

Bidder’s Duty to Inform Itself 

Bidders’ attention is drawn to the Disclaimer at the front of Part I and to the Bidders’ 

duty to inform itself. 

The submission of this Proposal will be construed as acknowledgement by the Bidder 

that it has satisfied itself as to the nature and location of the Project, the general and local 

conditions of the Plant Site and its environs, the services to be provided, and other 

matters which, if the Bidder’s Proposal is accepted, may affect the Bidder’s performance 

of its obligations under the Model PPA. In particular, in submitting its Proposal, the 

Bidder is deemed to have, amongst others: 

(i) 

carefully examined and familiarised itself with this RFP, including the 

Model PPA; 



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(ii) 

(iii) 

(iv) 

(v) 

familiarised itself with the Legal Requirements, including labour, 

environmental and financial laws, and satisfied itself that complying with these 

Legal Requirements has been fully considered; 

carefully examined all available information not being part of the RFP 

including studies, maps, reports, charts, records, Legal Requirements, regulations 

and other sources as are available to the Bidder; 

made its own interpretations, deductions, conclusions and assessment of 

the Plant Site, the geotechnical, meteorological, hydrological, atmospheric and all 

other ambient, surface and subsurface conditions in and around the Plant Site and 

the circumstances that the Bidder, if its Proposal is accepted, may experience or 

encounter in implementing the Project; 

informed itself of the restrictions, procedures, costs, timings and difficulties 

associated with: 

 

 

 

 

 

restrictions and constraints, if any, imposed by the existing infrastructure 

including roads, bridges and harbours; 

the local labour market and the visas, work permits and other approvals for 

expatriate personnel; 

customs clearances and other approvals for the importation of plant, 

equipment and materials; 

the market in Malawi for Coal 

financial and currency matters. 

(vi) 

(vii) 

informed itself of the legal, regulatory and institutional reform processes 

in Malawi, particularly as they relate to relevant sectors such as the energy sector 

and financial sector; 

made full allowance in its Proposal for the resources required to fulfil its 

obligations under the Model PPA. 

The failure of any Bidder to receive or examine any form or document, or to otherwise 

fully inform itself shall not be grounds for the Bidder to subsequently alter its Proposal 

after submission, nor shall it in any way relieve the Bidder from any responsibility for 

successfully executing the Project within the terms of the Model PPA. 

Mandatory Proposal Requirements 

Failure to comply with the requirements of this Section (4.7.5) as set out below shall 

constitute grounds for rejection of the Proposal: 

(i) General Requirements 

Proposals may be rejected if the following events occur: 



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The Bidder has been pre-qualified and a qualified member is replaced or is 

no longer in the consortium; 

The Proposal is not marked and sealed in accordance with the 

requirements of Section (4.10.2); 

The Proposal does not contain the information as required under this RFP 

and in the formats specified in the Annexes and Forms, as appropriate; 

The Proposal is valid for a period of less than six (6) months pursuant to 

Section (4.8) and is not accompanied by a Bid Security complying with the 

requirements of Section (4.9.1); 

A signed Technical Proposal letter is not duly signed; 

A consortium agreement or joint venture agreement is not provided where 

the various participants agree to jointly carry out their obligations pursuant 

to the RFP; 

Resolutions from the Board of Directors of each member company 

authorising their participation in the Proposal is not provided; 

Power(s)-of-attorney enforceable under Indonesian law are not provided 

with the requisite certificate of non-revocation confirming the authority of 

the signatories to sign for and on behalf of the Bidder. 

The deviations to the Model PPA set out in Form H of the Bidder’s 

Administrative & Technical Proposal represent a complete list of deviations 

it would seek to discuss and containand contain material deviations; 

The Proposal contains a memorandum from all intended subscribers of 

equity committing them to: 

the full amount of the required equity, being less than 30% of the 

Project’s total capital requirements; 

minimum Stand-by Equity of a further 10% of the Project’s total 

capital requirements; 

disbursement of equity in accordance with Power Purchase 

Agreement requirements. 

The lead member of the Bidder shall retain less than 25 % of the equity 

capital in the Seller for a minimum of 5 years from the Commercial 

Operation Date. 

The Responsiveness Evaluation – General (refer Annex III A) will be applied in 

the First Step Evaluation (refer Section 6.4) to confirm general responsiveness of 

the Proposal. 

(ii) 

Technical Requirements 



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The following will be grounds for rejection of the Proposal: 

 

 

 

 

The Plant that does not conform to the Minimum Functional Specification 

as stipulated in Appendix A and Appendix B of the Model PPA; 

Incomplete scope, ill-defined site or contractual interfaces, or open 

assumptions (e.g. subsurface conditions at the Plant Site, future market 

conditions for coal in Malawi); 

Relaxation of environmental standards; 

Proposed manufacturers of steam-generator, steam-turbine and electricalgenerator 

plant without a track record of satisfactory commercial 

performance of similar equipment of no less than fifteen thousand 

(15,000) hours on at least one other project (with experience reference 

sheets to be provided to confirm compliance); 

The Responsiveness Evaluation – Technical (refer Annex III B) will be applied in 

the First Step Evaluation (refer Section 6.5) to confirm technical responsiveness of 

the Proposal. 

(iii) 

Financial Requirements 

Proposals may be rejected under the following conditions: 

 

 

 

A signed Price Proposal letter is not provided with the form specified in 

Form G and the signature of a duly authorized official; 

The Tariff offered by the Bidder in the form I does not comply with the 

structure and pricing mechanisms specified in the Section 5.3.2; 

The Proposal rely on Government privileges, concessions and/or 

guarantees; 

Cost and Risk of Proposals 

Bidders shall bear all costs, including those of professional advisors, incurred by them in 

preparing and submitting their Proposals, executing the Model PPA and finalising 

financing regardless of the conduct or outcome of the evaluation process, or subsequent 

finance-ability of the Project. Neither PPC, nor any Government Instrumentality, nor 

any Representative of these parties shall have any liability whatsoever to any Bidder in 

respect of any decision taken by Bidders in relation to their bids whether or not in 

reliance on any matter supplied by PPC, any Government Instrumentality, or any of 

their Representatives. 



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Interest and Exchange Rate Movements 

The Bidder shall bear all risks associated with movements in interest rates and exchange 

rates over the period up to the expiration of the original Proposal validity period. In the 

event that PPC asks the Bidder to extend the period of validity for a specified period, the 

Bidder may extend the bid validity as requested by PPC without any change in the 

proposal. 

Proposal Validity 

Each Proposal shall constitute a firm offer and one that shall remain valid and open for 

acceptance for a period of six (6) months following Bid Closing. During this period the 

proposed Tariff shall remain valid and no Bidder shall withdraw its Proposal. Any 

Proposal offering less than the stipulated Proposal validity period will be rejected. 

Prior to the expiration of the original Proposal validity period, PPC may ask one or more 

of the Bidders to extend the period of validity for a specified period. The request for an 

extension to the original validity date and the responses to it shall be made in writing. If 

any Bidder does not agree to such extension, it may advise PPC of its decision in writing 

prior to the expiration of the original period without forfeiting its Bid Security, and 

withdraw its Proposal. If, following the issuance by PPC of a notice of extension, PPC 

prior to the expiration date of the original validity period does not receive a notice of 

withdrawal, the extension shall be considered to have been accepted by the Bidder and 

the Bidder shall extend the effective period of the Bid Security accordingly or be 

disqualified. 

A Bidder agreeing to the request will not be permitted to modify its Proposal, and will 

be required to extend the validity of its Bid Security accordingly. The provisions of 

Section 4.9 regarding release and forfeiture of Bid Security shall continue to apply 

during the extended period of Proposal validity. 

Securities 

Bid Security 

A Bid Security payable in Malawi shall be furnished to PPC with the Proposal. The Bid 

Security shall be to the value of: 

(Amount) 

This security shall be in the form of a bank guarantee issued by a reputable local bank or 

foreign bank operating in Malawi, in the form provided in Annex II. The Bid Security 

shall be valid for a period of not less than seven (7) months from Bid Closing. Any 

Proposal not accompanied by a Bid Security complying with this Section will be rejected. 

The Bidder shall forfeit the Bid Security without any notice, demand, or other legal 

process: 



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(i) 

if the Bidder withdraws its Proposal during the period of Proposal validity or 

prior to being notified that its Proposal is rejected by PPC; or 

(ii) if the Bidder’s Proposal contains any false statements or material misrepresentations; 

or 

(iii) 

(iv) 

if a Consortium member of the Bidder disposes of or withdraws its interest in the 

Project prior to execution of the Model PPA so that it no longer complies with the 

prequalification requirements; 

in the case of a short-listed (three chosen bidders) Bidder, if it fails to: 

a. begin discussions of Model PPA within one month of being invited to do 

so by PPC; or 

b. execute the Model PPA within three (3) months after finalising 

discussions; or 

c. furnish the Performance Security Stage I by the time in the form specified 

in the PPA. 

Bidders who decline PPC’s request to extend the validity of their Proposals pursuant to 

Section [4.8] shall have their Bid Security returned to them upon the expiration of their 

Proposal validity. 

After the short-listed Bidders have been selected and have extended the validity periods 

of their Proposals, if necessary, pursuant to Section 4.8, the Bid Security of those 

Bidders who were not short-listed will be returned. 

The Bid Securities of short-listed Bidders will be returned upon the sooner of the 

expiration date of their Proposals or the execution of the PPA with the Seller formed by 

the successful Bidder. 

Performance Securities 

Prior to the Execution Date and within the time specified in the PPA, the Bidder shall 

provide PPC with the Performance Security Stage I in the form specified in the PPA to 

the value of 

(Amount) 

issued by a reputable local bank or foreign bank operating in Malawi. The Performance 

Security Stage I may be forfeited in accordance with the provisions of the PPA. 

The Performance Security Stage I will be returned upon achievement of all Conditions 

Precedent and the receipt of the Performance Security Stage II to the value of 

(Amount) consisting of 4 (four) Bank Guarantees of (Amount) each. 



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issued by a reputable local bank or foreign bank operating in Malawi in accordance with 

the PPA. The Performance Security Stage II may be forfeited in accordance with the 

provisions of the PPA. 

The Performance Security Stage II will be returned upon achievement of the Commercial 

Operation Date. The Performance Security Stage II may be forfeited in accordance with 

the provisions of the PPA. 

If the developer fails to achieve Financial Closing date (FC) due to their mistakes, then 

the Performance Security Stage I shall be forfeit. 

If the developer fails to achieve COD due to their mistakes, then for each month of the 

delay PPC will forfeit 25% of the Performance Security Stage II. The understanding of 

the first month of the delay shall include 1 day delay from the target COD. 

Submission of Proposal 

Authorisation 

The Administrative & Technical Proposal Letter and the Price Proposal Letter shall be 

signed by the person or persons duly authorised to bind the Bidder to the Proposal. 

Proof of authorisation in the form of written power(s)-of-attorney and resolutions of 

each member's Board of Directors in terms acceptable to PPC from consortium members 

to authorise the signatories to sign on their behalf shall be attached to the Administrative 

& Technical Proposal Letter and Price Proposal Letter. 

The forms for the Proposal letters and the Bid Security and other securities, as 

appropriate, shall be adopted without modification other than inclusion of dates, 

references to addenda, names of signatories, addresses and the like. 

Format, Sealing and Marking 

The Bidders shall submit their Proposals in two Envelopes. 

In First envelope, Bidders shall submit: one original of the Administrative & Technical 

Proposal (clearly marked “Original”) and one copy ( clearly marked “Copy”). In second 

Envelope, Bidders shall submit one original of the Price Proposal (clearly marked 

“Original”) and one copy (clearly marked “Copy”). Any discrepancy between the 

original and a copy will be resolved in favour of the original. 

The Proposals, comprising the Administrative & Technical Proposal and Price Proposal 

shall be delivered in a sealed package labelled in bold letters. 

The Proposal shall be submitted to the following address no later than the Bid Closing 

for each Step: 

(Name and address) 



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If the Proposal is not sealed and marked as specified below, PPC may reject it as nonconforming 

and will assume no responsibility for its misplacement or premature 

opening. The package shall also clearly state the Bidder’s name and address. 

(i) 

Inner Package 1: The Administrative & Technical Proposal shall bear the following 

identification: 

ADMINISTRATIVE & TECHNICAL PROPOSAL FOR 

1 x 600 MW _______ _____ Fired ______ Power Plant 

Bidder’s Full Name : 

…………………………………………………… 

Address ...................................................................................................... 

Within the this package will be two sealed envelopes: 

 

 

One envelope, containing one set of the Administrative & Technical 

Proposal documents including original Bid Security clearly marked 

“Original” on the front and back pages; and 

The other envelope, containing two copies of the Administrative & 

Technical Proposal clearly marked “Copy” on the front and back pages. 

(i) 

Inner Package 2: The Price Proposal shall be enclosed in the Proposal package in a 

separate inner sealed envelope bear the following identification: 

DO NOT OPEN 

PRICE PROPOSAL FOR 

1 x 600 MW ______ _____ Fired ______ Power Plant 

Bidder’s Full Name : 

…………………………………………………… 

Address ...................................................................................................... 

The Price Proposal shall contain in one sealed envelope consist of: 

 

One envelope, containing one set of the Price Proposal documents with 

clearly marked “Original” on the front and back pages; and 



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The other envelope, containing two copies of the Price Proposal clearly 

marked “Copy” on the front and back pages. 

The name and address of the Bidder shall be written on each of the inner packages 

allowing the return of the Proposal unopened in the event of revision or 

withdrawal prior to Bid Closing or late delivery. 

Modification and Withdrawal of Proposal 

At any time prior to Bid Closing Step a Bidder may modify or withdraw its Proposal 

after submission, provided that the modification or withdrawal is received in writing by 

PPC prior to Bid Closing Step and complies with the following: 

(i) 

(ii) 

A Bidder’s modified Proposal shall be prepared, sealed, marked and delivered in 

accordance with the requirements for submission of Proposals, including those 

specified in Section 4.10.2 (including Bid Security), with seal package additionally 

marked "MODIFICATION". On receipt of the modified Proposal PPC shall 

return to the Bidder its prior unopened Proposal. 

A Bidder may request in writing that its unopened Proposal be withdrawn and, 

provided such request is received prior to Bid Closing, such Proposal (including 

Bid Security) shall be returned to the Bidder. Withdrawal of a Proposal during 

the interval between the Bid Closing and before the expiration of the period of 

Proposal validity specified in the Proposal Letter will result in the forfeiture of 

the Bid Security pursuant to Section 4.9.1. 

Bid Closing 

Bid Closing shall be 13:30 Malawi on (Date) for the Administrative and Technical 

Proposal and also for the Price Proposal. Proposals must be received by PPC at the 

address stipulated in Section 4.10.2 by Bid Closing. 

Proposal submission must be made to the address specified in Section 4.10.2 by Handdelivery. 

Proposals submitted by other means will not be accepted. 

PPC may, at its discretion, extend the deadline for submission of Proposals by issuing an 

Addendum. 

Late Proposals 

Any Proposal received after Bid Closing will be rejected and returned unopened 

regardless of the reason for the delay. It is the sole responsibility of the Bidder to 

comply with the provisions of this RFP for submission of Proposals. 

Proposal Opening 

Administrative & Technical Proposals 

For all Proposals properly lodged with the Tender Committee, the envelopes containing 

the Administrative & Technical Proposals and the corresponding Bid Securities will be 



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opened by the Tender Committee at the same date of the Bid Closing at 14.00 WIB at a 

place to be announced. Bidders choosing to attend the opening shall sign a register 

evidencing their attendance. 

At the opening of the Administrative & Technical Proposals, the Tender Committee will 

examine the Proposals and record Bidders’ names, any withdrawals, the presence or 

absence of Bid Securities, whether the documents have been properly signed and 

complete and such other details as PPC may consider appropriate. The Tender 

Committee will prepare minutes of the openings of the Administrative & Technical 

Proposals and will immediately announce: 

the names of the Bidders; 

the value of the Bid Security and the name of the issuing agency; 

whether both the Administrative & Technical Proposal and Price 

ProposalshaveProposals have been received. 

Information of a commercially sensitive nature to each Proposal will not be disclosed. 

Proposals for which a notice of withdrawal has been received pursuant to 

Section [4.10.3] will not be opened. 

Price Proposals 

Price Proposals of the Bidders whose Administrative & Technical Proposals have passed 

the First Step e Evaluation, Their Price envelope shall be opened by the Tender 

Committee at the date specified at (Time) at a place to be announced. Those Bidders 

whose Administrative & Technical Proposals have passed the First Step e Evaluation 

and wish to attend the opening of the Price Proposals, may do so. 

At the opening of the Price Proposals, the Tender Committee will examine the Proposals 

and record Bidders’ names, Summary of Price Proposal, any discount, whether the 

documents have been properly signed and complete and such other details as PPC may 

consider appropriate. The Tender Committee will prepare minutes of the openings of 

the Price Proposals. 

Confidentiality 

After Proposals have been opened, information relating to the examination, clarification, 

evaluation and comparison of Proposals and recommendations concerning the shortlisting 

of Bidders and award of the Project shall not be disclosed to Bidders or other 

persons not officially concerned with such process except as provided for herein. 

Neither PPC, nor any Government Instrumentality, nor any of their Representatives will 

be liable for any loss or damages resulting from any disclosure before, during and after 

the bidding process. 

Any effort by a Bidder to influence PPC, or any Government Instrumentality or any of 

their Representatives in the process of examining, clarifying, evaluating and comparing 



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Proposals, and in decisions concerning award of the Project, may result in the rejection 

of the Bidder’s Proposal and forfeiture of the Bid Security. 

Penalty for Non Performance during Operation 

Non-performance with respect to the Availability Factor will be penalized in accordance 

with the provisions of Model PPA (Part II of RFP). 

PROPOSAL REQUIREMENTS 

General 

In preparing their Proposals, Bidders shall clearly distinguish between their 

Administrative & Technical Proposal and Price Proposal in the material submitted. Any 

information related to the Tariff and any document containing such information, shall 

not be included in or enclosed with the Administrative & Technical Proposal, but should 

form part of the Price Proposal. 

Administrative & Technical Proposal 

Presentation 

The Administrative & Technical Proposal shall demonstrate a sound knowledge of the 

requirements of the Project, an understanding of the obligations of the Seller, and a 

capacity to undertake the Project in compliance with the Model PPA. 

The Administrative & Technical Proposal shall be submitted under cover of a letter that 

shall be in the form specified in Form A of the List of Forms. The information provided 

in the Technical Proposal shall be presented in the formats specified including those 

provided in Forms B to E of the List of Forms. Failure to provide this information in full 

and in the form specified shall be grounds for rejecting the Proposal as non-responsive. 

The Administrative & Technical Proposal shall respond to the request for information 

under this Section 5.2 and other provisions of this RFP (unless the information forms 

part of the Price Proposal). To the extent that the Forms do not accommodate 

information requested in the RFP (other than information forming part of the Price 

Proposal), then Bidders shall append such information to the Administrative & 

Technical Proposal. Bidders may also submit such other documents as may further 

demonstrate their ability to undertake the Project in accordance with the Model PPA. 

Project Technical Details 

Bidders shall provide general technical information, with technical document where 

available, to enable PPC to fully understand the Plant proposed by the Bidder and to 

make judgements about, amongst others, its efficiency, durability, reliability and general 

compliance with the Minimum Functional Specification. 



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The information to be provided, as part of the Technical Proposal, shall include amongst 

others: 

(i) 

 

 

 

Design 

Applicable standards for design, materials, manufacture, mechanical and 

electrical works, civil and structural works, communications, fire protection, 

heating and ventilation, operation and maintenance, and all other works to be 

undertaken to fulfil the requirements of the Model PPA. Such applicable 

standards will be consistent with an efficient operating life of the Plant of no less 

than thirty (30) years. 

Indicative Plant Site layout drawings showing locations of key features of the 

proposed Plant including buildings, coal and ash handling facilities, water 

facilities, services, interconnection, access roads, as appropriate. Such locations 

shall be within the areas designated on the Indicative Plant Site Plan as being 

available for the particular purposes. The Indicative Plant Site layout drawings 

shall nominate the location of drainage and effluent discharge points. The 

location of the 150 kV substation and 150 kV transmission line route shall be 

shown. 

The Bidder’s transportation plan for transporting plant, equipment and materials to the 

Plant Site. 

(ii) 

 

 

 

 

 

Generating Plant and Auxiliaries 

Plant shall be brand new, 

Plant Site civil works including all site utilities and services, raising building platforms, 

constructing dykes as necessary and constructing effective drainage and dewatering 

systems to prevent flooding of buildings and plant facilities. 

The Net Dependable Capacity of the plant in MW at Site Conditions and burning 

the coal, proposed by the Bidder. The Net Dependable Capacity, as adjusted for 

differences between ambient conditions and Site Conditions, is guaranteed by the 

Bidder. 

Outline design of the Plant’s electrical plant and systems, including redundancy 

levels to be provided and in particular the mode of connection to PPC Grid 

System. 

Outline design of Plant auxiliaries, services and systems including Coal and Ash 

handling system, cooling water system, lube oil, hydraulic oil, service water, 

heating and ventilation system, fire detection and protection system and exhaust 

systems. Related data, with details of equipment redundancy levels, shall be 

provided. 



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Details of generating plant including: 

- Manufacturer, type and model of each Unit, the number of Units 

- Start-up times, loading rates and other dynamic parameters. 

- Steam turbine. 

- AVR, exciters including reactive power control and related equipment. 

- Auxiliary plant and accessories. 

 

(iii) 

 

 

(iv) 

 

 

(v) 

 

 

(vi) 

 

Confirmation that the proposed Plant would employ proven technology. 

Experience reference sheets or similar evidence of proven performance on other 

projects shall be provided in respect of major plant items. 

Water Supply 

The water requirements for the operation of the Plant and the water facilities and 

on-site storage to be provided as part of the Plant. 

Effluent limits of segregated wastewater system and location of effluent 

discharge point. 

Coal Supply 

Choice of Coal and Coal Supplier and the Technical Proposal shall specify, 

amongst others, the following: 

- Name and details of the Coal Supplier; 

- Location of coal mine and method of transportation to the plant site 

- Type and specification of Coal; 

- Key parameters of the Long Term Coal Supply Contract; 

- Commercial track record of the Coal Supplier. 

Details of Coal and Ash Handling Facilities as may be required at the Plant Site 

to meet or exceed the requirements of the Minimum Functional Specification. 

Electrical Interconnection 

Single line diagram up to the Interconnection Point showing all circuit breakers, 

isolators, Metering Point, current and potential transformers for metering and 

protection, earthing switches, lightning arrestors, power transformers and 

generators. 

The maximum make and break fault contributions to PPC’s Grid System from the 

Plant at 150 kV, including motor and generator contributions. 

Instrumentation and Control 

Instrumentation, control and protection systems including the relay protection 

scheme proposed by the Bidder for line, busbars, transformers, generators, etc. 



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including fire protection. Protection schemes may have interfacing with PPC’s 

equipment and these protective schemes are subject to concurrence of PPC. 

 

 

(vii) 

 

Communications systems and equipment for: 

- direct digital communications of dispatch instructions 

- voice communication with the Dispatch Centre 

- normal voice, email and facsimile communication 

- SCADA 

Metering devices and proposed location of Metering Equipment and Check 

Metering Equipment. 

General 

All other details necessary to enable PPC to ascertain if the proposed Plant will 

meet the Minimum Functional Specification. 

Target Availability 

The Seller will contract under the PPA to achieve availability levels with respect to the 

Net Dependable Capacity (taking into account planned maintenance outages, forced 

outages and partial de-ratings) as follows: 

(i) Target Availability from Commercial Operation Date shall be at least 80%; 

(ii) 

Projected Availability for each Contract Year to be as nominated by the Bidder in 

its Proposal (referred Form D) and agreed between the Parties prior to the 

Execution Date; 

Organisation Plans 

The Bidder shall submit a detailed organisational chart, staffing plan and proposed 

quality assurance program in accordance with the requirements outlined in Form E. 

Insurance Plan 

The Bidder shall submit a detailed insurance plan for the Plant. The plan shall accord 

with the Model PPA and shall specify the type of insurances, the amount of cover. 

Domestic Participation 

Bidders shall provide information on the proposed domestic participation in the Project, 

identifying the extent to which they plan to employ local contractors, suppliers and 

labour in each of the Construction Phase and Operating Phase. 



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Services and Utilities 

The Seller will be required to arrange or provide all services and utilities for the Project 

unless otherwise expressly stated. 

The Seller may apply to PPC during the Construction Phase for an 20 kV connection (if 

available), which will be provided on the same terms and prices as apply at the time for 

applicable PPC’s consumers Tariff, in the case such supply from PPC is not available, 

Seller should provide by its own construction power. 

Environmental Obligations 

The Seller will be required to prepare an Environmental Assessment and Management 

Plan that complies with relevant Legal requirements and Environmental Requirements. 

The Seller shall apply for, and obtain, an appropriate licence from responsible 

organisation and shall meet the conditions of that license at all times during the 

Construction Phase and Operating Phase. 

The Bidder shall describe qualitatively and quantitatively the potential environmental 

impacts of the Plant it proposes and shall support its submission with details including, 

among other things: 

 

 

 

 

 

A description of environmental mitigation and protection measures to be 

implemented. 

The quantities and types of all liquid and solid effluents, including sewage 

system, that will be produced at the Plant Site, and the methods to be employed 

for neutralising these effluents. The proposed methods for disposal of all liquid 

and solid wastes from the power station including any Coal and Ash / Wastes 

Handling should be clearly outlined in the Proposal. 

The quantities and rates of emissions of pollutants, including the types of 

pollutants, and details of the proposed methods of pollution control and types of 

pollution control equipment (e.g. dust control, electric precipitator and if 

necessary desulphurization device), and other mitigation measures. Guaranteed 

emission rates should also be provided. 

The effects on marine, estuarine or riverine environments, as appropriate, 

including water temperature, morphology and aquatic biodiversity. The location 

of abstraction and discharge points and other such details shall be provided. 

Construction effects (e.g. impacts associated with to transportation of plant to the 

Plant Site, construction within the Plant Site Services Corridors, etc.). 



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Project Milestones Schedule 

The Bidder shall submit a Project Milestones Schedule pursuant to the requirements set 

out in Form C. The Project Milestones Schedule shall provide a realistic schedule by 

which Commercial Operation Date will be achieved. 

Price Proposal 

Presentation 

Bidders shall complete the Price Proposal strictly in accordance with the RFP and, where 

specified, the required information shall be provided in the requested format including 

those formats defined in the Price Proposal Forms (refer to the List of Forms). The Price 

Proposal shall include: 

(i) 

(ii) 

(iii) 

Price Proposal letter, and 

completed Forms, and other information as required pursuant to this RFP, and 

any additional documents as may be required to meet specified information 

requirements or to demonstrate the Bidder’s capacity to undertake the Project in 

accordance with the Model PPA. 

Failure to provide such information in full shall be grounds for rejection of the Proposal 

on the basis of non-responsiveness. 

Tariff 

For the simplification and evaluation purposes, the Tariff structure shall be consisting of: 

(i) 

Fixed Payment 

 

 

 

A component designated for capital cost recovery in cent USD/kWh, which 

is not subject to escalation and would be offered in flat basis or not more 

than 2 stages. 

B component as Fixed O & M charge in cents USD/kWh, which is indexed 

50 % portion to the US Consumer Price Index (USCPI) and 50 % portion to 

the Malawi Consumer Price Index (CPI); 

E component (if any) designated for capital cost recovery of the associated 

transmission lines, in cent USD/kWh, and would be offered in flat basis or 

not more than 2 stages. 

(ii) 

Variable Payment 

 

C component as Fuel charge in cent USD/kWh, which reflects the CIF Coal 

price, high caloric value and net plant heat rate, and is of pass through 



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concept. The developer will procure the coal based on the bid document 

approved by PPC, and price agreed by PPC. In the case price is not agreed 

by PPC, then PPC will supply the coal for a certain short period of time, 

while the developer will re-tender the coal supplier. For more details please 

refer to Appendix S of the Model PPA. 

D component as Variable O & M in cent USD/kWh, which is indexed 25 % 

portion to the US Consumer Price Index (USCPI) and 75 % portion to the 

Malawi Consumer Price Index (CPI); 

All the Tariff in cents USD/kWh mentioned above, should be based on the following 

conditions: (a) AF (availability factor) of 80 % and CF (capacity factor) of 80%, (b) 

binding proposed Net Plant Heat Rate table, and (c) 30 years term of the contract. 

The structure and pricing mechanism offered in the Proposal will be converted into 

structure and pricing provisions in the Appendix G of the Model PPA. 

In the PPA, the agreed Tariff/Charge will be stated in Kwacha, while Foreign 

Component could be based on a Reference Exchange Rate and adjusted accordingly 

from time to time, according to the provision of PPA Appendix G 

In addition, provision is made for payment of Start-up Allowances according to the 

number of cold starts, warm starts and hot starts. 

Cash Flow 

The basis of sale and purchase of capacity and energy will fall into two (2) distinct 

regimes as follows: 

(i) 

(ii) 

Uniting Phase: This is the Uniting period of the Plant. During the Initial Uniting 

Phase, no Capacity Payment will be payable. However, payments will be made 

by PPC to the Seller of the Coal components of the Energy Payment for metered 

energy during the Uniting period starting from synchronization to PPC grid 

provided that the plant continuously operates for more than 6 (six) hours.; 

Operating Phase: This is the commercial operation period of the Plant. Capacity 

Payments and Energy Payments will be payable for Available Capacity and 

metered energy. Start-Up Allowance will also be payable for Start-Ups requested 

by PPC in this period. 

Project Cost 

The Seller should seek to cover the service and repayment of all project debt and to 

provide a return on invested equity through the Capital Cost Recovery (CCR) 

component of the Capacity Payment. 



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Electricity Payments and Supporting Cost Data 

The Forms submitted by Bidders in compliance with the requirements for the Price 

Proposal shall provide the required base rates for calculating the Capacity Charge and 

Energy Charge components in their relevant currencies. 

Bidders may be required to justify their calculations of electricity prices and provide 

supporting documentation and cost data, as requested. Such information provided by 

the Bidder will be treated as confidential. 

The contracted Capacity Charge, Energy Charge and other scheduled electricity 

payments shall be paid in accordance with the terms and conditions of the PPA. All 

payments for the purchase of capacity and energy from the Plant will be calculated in 

Indonesian Kwacha and will be paid in Kwacha. Conversion of Kwacha to US$ or other 

currencies for the payment of costs and dividends outside Malawi shall be the sole 

responsibility of the Seller. 

Deviations from the Model PPA 

Should the Bidder wish to propose non-material deviations from the Model PPA, they 

shall be entered into the Form provided as Form H. The determination of whether a 

change proposed by a Bidder is material or non-material shall always be at the 

discretion of PPC’s Tender Committee. Any changes other than to correct numerical 

errors, to incorporate specific information about the bid or change wordings to clarify 

sentences in the PPA shall be deemed to be a material change. Each proposed deviation 

shall be described and explained. The Bidder shall also specify in “mark-up” form the 

precise wording of the amendment it proposes to the relevant Project Document 

provision. 

The Bidder shall confirm in its Proposal its acceptance of, and willingness to execute, the 

Model PPA without amendment save only the amendments made through the issue of 

Addenda prior to Bid Closing and the non-material deviations noted in Form H. 

Proposal Letters and Forms 

Introductory Notes 

The Proposal to be prepared by the Bidder shall include the documents and Forms 

specified in the RFP. The Bidder’s attention is drawn to the Instructions to Bidders, and 

in particular to the requirement that the Bidder shall complete the Forms and respond to 

the questions in the specified format and in compliance with the RFP. 

Where the Bidder is a consortium with two or more members, each being a properly 

constituted company, corporation, firm, joint venture or other entity, each member shall, 

where relevant and applicable, separately complete the Forms and otherwise responds 



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to the RFP so that the Proposal contains the required information about each constituent 

member of the Bidder. 

The Bidder’s attention is drawn to the requirements of Section 5 of Instructions to 

Bidders and in particular to the general need to fully describe it’s Proposal. To the 

extent that information additional to that specifically requested in the Forms is required, 

the Bidder may include such information on other sheets and attach them to the 

Proposal. 

Inclusions in the Proposal 

The Bidders’ attention is drawn particularly to the provisions of Section 4.7.5 Mandatory 

Proposal Requirements and to the responsiveness requirements of the Responsiveness 

Evaluation (Annex III). Failure to properly complete the Forms and to otherwise satisfy 

the requirements of these provisions will be grounds for rejection of the Proposal as nonresponsive. 

EVALUATION PROCEDURE 

Outline of Evaluation Procedure 

The evaluation process is a stepped process: 

Step One: 

Administrative and Technical Evaluation 

The Proposal is reviewed for completeness and substantial 

responsiveness in accordance with the Responsiveness Evaluation 

(refer Annex III: Responsiveness Evaluation – General 

Responsiveness). 

The Technical Proposals are evaluated for responsiveness (refer 

Annex III: Responsiveness Evaluation – Technical Responsiveness) 

and compliance with the requirements of the RFP and with the 

Minimum Functional Specification, in particular. 

Step Two: 

Price Evaluation 

The Price Proposals of those Bidders who has successfully passed 

stage one will be opened and evaluated. Three (3) Bidders with the 

highest rankings will be short-listed. 

Evaluation 

PPC intends to select three preferred Bidders. 

The First Rank Bidder will be selected first and invited to discuss 

terms for executing the Model PPA. If the discussions for the 

finalization of the PPA are not successful with the First Rank Bidder 

after three months, the Second Rank Bidder will be selected and 



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invited to discuss terms for executing the Model PPA conditioned on 

the Second Rank Bidder accepting the First Rank Bidder’s proposed 

tariff. 

If the discussions with the Second Rank Bidder prove unsuccessful 

after three months, PPC will enter into negotiations with the Third 

Rank Bidder to finalize the Model PPA conditioned on the Third Rank 

Bidder accepting the First Rank Bidder’s proposed tariff. PPC may 

terminate the tender process or initiate discussions with lower rank 

Bidders, if the discussions with the Third Rank Bidder do not result in 

agreement with respect to the Model PPA after three months. 

Clarification of Proposals 

During the examination, evaluation and comparison of Proposals, the Tender 

Committee may, at its discretion, ask the Bidders for clarification of their Proposals. 

Request for clarifications and responses shall be in writing and no change in the Tariff or 

substance of the Proposal shall be sought, offered or permitted. 

Right to Reject Proposals 

PPC reserves the right to accept or reject any Proposal and to annul the bidding process 

and reject all Proposals at any time prior to the signing of the Model PPA, without 

thereby incurring any liability to the affected Bidder or Bidders on the grounds of PPC’s 

action. bidders who submit Proposals do so without recourse against PPC or any 

Government Instrumentality or their Representatives for either rejection by PPC or 

failure to execute the Model PPA for any reason whatsoever. 

PPC reserves the right to reject the Proposal of any short-listed Bidder who has qualified 

on the basis of misrepresentation, suppressed or incomplete information. 

Step One Evaluation: Administrative 

In the First Step Evaluation of Proposals, the Tender Committee will determine whether 

each Proposal is responsive. A Proposal may be disqualified and excluded at this step 

from further consideration for a failure to meet all conditions of this Section 6.4 or for 

any other valid reason including those listed below: 

• Failure to be responsive, as determined by the “Responsiveness Evaluation - 

General” (refer Annex III). 

• Receipt by the Tender Committee of a Proposal after the Bid Closing. 

• Failure to submit supporting documentation or any other clarification or any 

documents requested by the Tender Committee within the required time frame. 

• Material misrepresentations in the Proposal. 



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• Illegal conduct or attempt to influence PPC, or any Government Instrumentality 

or any of their Representatives in their evaluation of a Proposal other than by 

means expressly sanctioned in the RFP. 

• Determination by the Tender Committee that the Bidder is unlikely to be able to 

fulfil the terms or conditions of the Proposals and of the Model PPA. 

• Form H (Deviations to the Model PPA), contains material deviations. 

Immediately upon opening the Price Proposals, the Form H submissions will be 

referred to the Tender Committee for determination on the nature of the 

proposed deviations and, if any are determined to be material, the Proposal will 

be rejected unless material deviations are promptly and unconditionally 

withdrawn immediately upon notification from Tender Committee without other 

adjustment to the Proposal. 

• Lack of a statement from the Consortium that (using Bidder’s own form): 

- the lead member of the Bidder shall retain not less than twenty five (25)% 

of the share of the Project Company for a period starting on Bid submission 

through five (5) years from COD; 

- at least one member shall retain not less than twenty five (25)% of the share 

of the Project Company for a period starting on Bid submission through 

five (5) years from COD. 

- the full amount of the required equity, being not less than 30% of the 

Project’s total capital requirements; 

- additional minimum Stand-by Equity of a further 10% of the Project’s total 

capital requirements will be available; 

- disbursement of equity in accordance with Power Purchase Agreement 

requirements. 

Proposals accepted by the Tender Committee in accordance with these principles will 

qualify for further consideration for the Technical evaluation, as described below. If a 

Proposal is found to be not substantially responsive, it will be rejected by PPC and may 

not subsequently be made responsive by correction or withdrawal of non-conforming 

deviations or reservations. 

Stage One Evaluation: Technical 

Compliance with Minimum Functional Specification 

The evaluation will be conducted to confirm compliance with the Minimum Functional 

Specification and with other obligations of the Seller as set out in the Model PPA. The 

Technical Proposals will be examined initially using the “Responsiveness Evaluation – 

Technical” (refer Annex III) to confirm that they are responsive. They will then be 



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assessed according to their technical compliance with the Model PPA and the Bidders’ 

satisfactory responses to the RFP information requirements. Among the issues to be 

satisfied are: 

(i) Plant Design Requirements (refer to Form D) 

 

 

 

 

 

 

The Technical Proposal shall include an outline design of the Plant 

conforming to the Minimum Functional Specification. 

Plant shall be brand new 

The proposed steam turbine manufacturer shall have at least five years 

experience in the manufacture of steam turbines and equipment of similar 

rating and design to that proposed and such turbines and equipment shall 

have seen satisfactory service on other projects over a minimum period of 

15000 hours. 

The proposed steam generator manufacturer shall have at least five years 

experience in the manufacture of steam generators and equipment of 

similar rating and design to that proposed and such steam generators and 

equipment shall have seen satisfactory service on other projects over a 

minimum period of 15000 hours. 

The proposed electric generators manufacturer shall have at least five years 

experience in the manufacture of electric generator and equipment of 

similar rating and design to that proposed and such generator and 

equipment shall have seen satisfactory service on other projects over a 

minimum period of 15000 hours. 

Expressions of Interest shall be included from the prospective plant 

suppliers confirming their commitment to supply the key items of plant 

including steam coal plant and coal handling system, steam generators, 

electrical generators, and steam turbines. 

(ii) 

Construction Phase Requirements 

 

 

 

 

A construction schedule in the required format shall be provided showing, 

amongst others, Required COD being achieved. 

The timetable given in the RFP and the scheduled operation dates in the 

PPA are accepted unconditionally. 

An undertaking is provided that construction impacts specified in the PPA 

are not exceeded; 

Proposed Construction Contractors shall have successfully completed 

Power Plant Project of at least 600 MW size 



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Expressions of Interest are included from any subcontractors and suppliers 

responsible for providing key works or plant. 

(iii) 

Operating Phase Requirements 

 

 

 

 

 

Emissions, discharges, noise and other impacts during the Operating Phase 

are within the limits specified in Clause 5.2 of Schedule 4 of the PPA. 

The principal O&M contractor proposed by the Bidder has past experience 

in operating and managing a power plant of at least 600 MW size; .;. 

An Expression of Interest is enclosed from the O&M contractor(s) proposed 

by the Bidder. 

The Organisation Plan complies with the minimum requirements and is 

complete, containing an organisational structure of the proposed Seller, a 

comprehensive staffing plan for the Plant and a proposed quality assurance 

program. 

The Target Availability of the Plant over the Operating Phase shall be no 

less than the availability levels proposed in Section 5.2.3. 

Technical Non-compliances 

Where Technical Proposals contain material non-compliances, the Bidder will be 

disqualified for the Stage Two Evaluation and the Proposal will be rejected. Proposals 

passing the Stage One of the evaluation process will proceed to the Stage Two 

Evaluation. 

Step Two Evaluation: Price Proposal 

Responsiveness of Price Proposal 

Price Proposals will be examined initially using the “Responsiveness Evaluation – 

Financial” (refer Annex III) to confirm that they are responsive. Unresponsive Price 

Proposals will be rejected. Criteria to be satisfied in meeting responsiveness include: 

 

 

 

The Price Proposal is complete, with all letters, annexes and Forms duly 

completed and properly signed as stipulated in the RFP; 

The Price Proposal letter is provided in the required form; 

Contract Base Price have been completed and the Tariff offered by the Bidder 

complies with the structure and pricing mechanisms specified in simplified 

structured as shown in Form I. 



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The proposed Components A and E shall not be subject to escalation. 

Components A and E proposals may be containing a staged structure of not more 

than 2 stages. 

Assessment and Ranking 

The proposal will be assessed using the levelized tariff method as demonstrated in the 

Part 3 Sample of Levelized Tariff Calculation. The followings shall be taken into account 

in calculating the levelized tariff : 

(i) 

Discount Factor 

The discount factor is the rate at which the Tariff is discounted to arrive at the 

levelized price. A discount rate of 10% will be applied in the levelizing of Tariffs 

for the purposes of evaluation. 

(ii) 

Escalation 

For the purposes of evaluation, all escalating components of the Tariff (B 

component and D component) are assumed to be escalated at a rate of 1.5% per 

annum from a base year (COD). Components A and E would not be escalated 

and Component C will have predetermined structure (flat or staged). 

(iii) 

Transmission losses adjustment 

For the purposes of evaluation, transmission losses will be taken into account 

with the base of 0.02% of total proposed base price per km for 150 kV and 0.01% 

for 500 kV. 

The total evaluated levelized tariff will be ranked from the lowest tariff to the highest tariff. 

Short-listing and Award 

The Project will be awarded to a Bidder according to the following procedure: 

1. On completion of the evaluation, the Tender Committee will prepare a 

recommendation for PPC’s Board of Directors (BOD) approval proposing: 

The three top-ranked Bidders are short-listed; 

The Bidder ranked first is the preferred Bidder and will be invited to 

discuss and to finalise Model Power Purchase Agreement (PPA). 

2. After approval by PPC’s BOD the Letter of Intent will be issued to the preferred 

Bidder. Upon counter-signing the Letter of Intent, the preferred Bidder will be 

invited to enter into discussions with PPC to finalise the PPA. If discussions with 

the preferred Bidder are unsuccessful or are not making satisfactory progress, the 

next-ranked from the top ranked Bidders will be invited to enter into discussions 

with PPC with a view to finalising the PPA. 



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3. Upon successfully concluding discussions, the successful Bidder will: 

 

 

 

 

form the project company (the Seller); 

execute the PPA; 

submit Performance Security Stage I valid up to the Financing Date; 

fulfil the Conditions Precedent in the PPA. 

4. Upon finalisation of the Model PPA and prior to Execution Date, the successful Bidder 

will: 

a. provide PPC with documentation from the Bidder’s Lenders confirming their 

intended participation in the Project; and 

b. form the project company and provide PPC with duly certified copies of the 

following: 

 

 

 

 

certificate of the Seller’s incorporation 

list of members of the Seller’s board of directors 

location of the Seller’s registered office 

copy of the resolution of the Seller’s board of directors authorising persons to 

witness the affixing of the Seller’s seal. 

c. reach formal agreement with its Lenders, and PPC, as applicable, on the final 

wording of the Sponsor’s Agreement; 

d. deliver to PPC the Performance Security Stage I. 

5. Upon execution of the Model PPA with the Seller, PPC will return the Bid Securities of 

unsuccessful Bidders, save Bid Security of the successful Bidder which will be retained 

until the Performance Security StageBidder, which will be retained until the Performance 

Security Stage, I is provided in accordance with the provisions of the PPA. 

6. PPC will have the right to reject all Proposals and not make an award. 

Cost of Finalising Model PPA 

The successful Bidder (or Bidders) shall bear all costs incurred by it in relation to any 

and all discussions and finalisation of the Model PPA, including those of professional 

advisers. Neither PPC, nor any Government Instrumentality nor their Representatives 

shall have any liability whatsoever to the Bidder in relation to its decisions or actions in 

finalising and executing the Model PPA, whether or not it has acted in reliance on any 

matter supplied or represented by PPC, or Government Instrumentality or their 

Representatives. 



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Model Clauses for Concession Contracts 

The contract must specify its duration, along with the Commencement Date that may or 

may not be the date of contract signing. The Commencement date is normally before the 

Service Period and the duration of the contract must be long enough to cover all of the 

Service Period. The choice of duration should be made in consideration of the following: 

The service requirements of the Contracting Authority, in conjunction with the 

consumer expectations identified in the demand and willingness to pay survey; 

Anticipated uses of assets that will remain with the Contracting Authority after the end 

of the Service Period, and the impact that contract duration will have on their condition 

when the Contracting Authority takes control of the assets; 

The amount of time it will take the private investor to achieve its targeted return on 

investment. This is the most important factor in setting the Service Period, and a good 

reason for not defining Service Periods in enabling legislation because it is impossible 

for legislators to anticipate how long each PPP project’s concession period should be. 

They may elect, however, to set a maximum Service Period; 

The affordability of the Service for the Contracting Authority, taking into account the 

expected useful life of the assets. A longer Service Period could enable the Authority to 

cover its share of the cost of such assets over a longer period, thereby lowering the level 

of periodic payments and related strain on budgetary resources; 

The cost of periodic asset refurbishment and related increases in such costs if the Service 

Period is relatively long; 

The terms of the project’s debt financing. While the term of the Service period may need 

to be extended in order to enable targeted returns on equity investing, it should not be 

extended beyond the time limits of available debt financing; and 

Certain components of the contract may have a different duration than the duration of 

the contract as a whole, for example a 20-year concession may have a monopoly 

provision that lasts only 5 years. 

In determining the Service Period, Contracting Agencies should also evaluate the profile 

of assets that will be used in providing services required by the contract. If there are 

assets that have useful lives in excess of the contemplated Service Period, alternative 

uses for those assets should be identified so that the Agency is not pressured into 

extending the Service Period to fully recover the cost of those assets, or pressured into 

increasing its payments over the contemplated Service Period in order to fully recover 

the cost of those assets before their useful lives have been expended. 



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Commencement of Service Delivery 

After signing of the PPP contract, there will usually be a period of construction or project 

development to put in place all the service delivery mechanisms. There is considerable 

risk associated with this period, in particular the risk of delays and/or cost over-runs for 

the construction effort. The contract must include provisions that specify how the public 

sector partner will be compensated in the event that the private sector operator fails to 

complete construction within the agreed timeframe. On the contractor’s side, they will 

need provisions in the contract that assure them the Contracting Agency will accept the 

constructed facilities if they meet certain specifications. 

A key issue in this area of contracting is to what extent the Contracting Authority will be 

involved in activities conducted during the construction or development phase. There 

must be clearly defined parameters of such involvement in the contract. The design, 

construction, maintenance, and performance of any asset procured or developed for the 

purpose of meeting output specifications of the contract are all the Contractor’s risks. In 

most cases, the Authority should not accept any role before Service Commencement 

other than the following: 

Review of the Contractor’s designs, maintenance, and operation procedures; 

Observation and testing of the plant and equipment being developed; 

Observing periodic testing of the equipment being installed; 

Discussing with the Contractor any proposed changes to agreed specifications; 

Auditing the Contractor’s activities to enforce agreed quality standards; and 

Verifying the existence of all agreed factors at Service Commencement. 

In performing the audit function referenced above, it is essential that the Authority keep 

close track of any drawdowns on loan facilities that the Contractor may have for funding 

the construction or development period. It is unfortunately common practice for firms 

to submit very low cost proposals with the intent to draw down on loan facilities faster 

than attaining the percentage completion targets specified in the loan agreement. The 

auditing will prevent a Contractor from representing that percentage completion targets 

have been met before they have actually been met, thereby causing the loan to be drawn 

down faster than it should. Fraudulent practice in this area is common, and the 

methodology is the Contractor draws down a large portion of the loan while having 

only attained a relatively small percentage of construction completion. 

When the fraudulent practice is noticed, the Contractor files for bankruptcy protection 

and leaves the country with inflated profits. In other words, the Contractor had never 

intended to complete construction within the low budget that it provided in its Cost 

Proposal and at the end of the process the Contracting Authority is left with construction 

that has not been completed. Because of this practice, Cost Proposals must be reviewed 

for reasonableness, rather than simply selecting the bidder who submits the lowest cost 

proposal. Usually, problems of this sort can be sorted out in the BAFO process. 

In providing contract terms that allow the Contracting Authority to check the percentage 

of completion claimed by the Contractor at various stages during construction period, it 



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is important that such provisions do not have the affect of transferring construction risk 

to the Authority. All design risks should rest with the private sector partner, and this 

can be achieved by tying the contract to the schedules and specifications provided in the 

bid.. 

The role of the Authority to confirm percentage of completion is intertwined with the 

“step-in rights” of the lenders. The contract between the Authority and the Contractor 

must be consistent with the loan agreements, so that the interests of the Authority and 

the lenders are protected in a consistent and complementary manner. The Authority 

and the lenders should both be focused on the objective: timely commencement of the 

quantity and quality of services specified in the contract. Procedures for submitting and 

receiving comments on design issues should enable protection of this fundamental goal. 

Before Service Commencement, the Contractor should be obligated to demonstrate that 

the assets and systems put into production meet the Output Specifications in the 

contract. The method of demonstration could include: (a) inspection of assets; (b) trial 

operations; and (c) other performance tests or inspections. No payments should be 

made to the Contractor by the Authority until Service Commencement. Partial 

payments during the construction period should be avoided if possible. This keeps the 

construction and design risk firmly upon the Contractor. 

Remedies for Delayed Service Delivery 

Both the Contracting Authority and the Contractor have strong incentives to get service 

delivery going on time. The Authority is under pressure from stakeholders who will use 

the service, and the Contractor needs payments from the Authority in order to make 

loan payments and service other cash flow needs. As indicated in the preceding section, 

the Authority should not make any payments to the Contractor until Service 

Commencement unless services can be commenced incrementally as construction 

continues. 

Protections for the Authority can be arranged in the contract, e.g. performance bonds, 

completion bonds, guarantees from the Contractor’s parent company, and provisions for 

liquidated damages in the event that completion is delayed. Events that cause delays in 

completion and which are beyond the reasonable control of either party should be 

included in the definitions of Force Majeure in the contract, thereby exempting either 

party from the obligation to pay damages in the event of delays. Contractors should 

take extra care to include the cost of relatively short delays in their financial planning. 

Rather long delays create problems for which advance budgeting cannot provide 

protection. 

Normally, contracts will have a provision allowing the Contracting Authority to 

terminate the contract in the event of a prolonged delay in Service Commencement. The 

contract should also provide rewards for early Service Commencement. Provisions for 

liquidated damages in the event of prolonged delays should have very specific formulas 

to calculate the amount owed, and very specific timelines for payment of the amounts 

owed. If the Authority will not suffer any losses due to prolonged delay then it should 



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not be entitled to liquidated damages. To protect against late Service Commencement, 

senior lenders will usually require Sub-Contractors to cover the debt service when the 

Contractor is required to pay liquidated damages. The Sub-Contractor will price this 

requirement into its contract with the Contractor. This will result in increased cost to the 

Authority, so the Authority should not require payment of liquidated damages unless 

absolutely necessary. Such a situation may exist in cases where the Authority has 

provided substantial assets to the Contractor, for its use in service delivery, and in doing 

so the Authority has lost the opportunity to put those assets to use in other important 

service delivery activities. 

Supervening Events 

A supervening event is an event that prevents the Contractor from being able to comply 

with Service Commencement obligations. One type of supervening event, as mentioned 

in the preceding section, is a Force Majeure event. There are also Relief Events, in which 

the Contractor bears some responsibility but not to the extent at which the Authority’s 

rights of early termination would arise. There are also Compensation Events, in which 

the Authority has the obligation to compensate the Contractor. Normally a 

Compensation Event is one that takes place when the risk of late completion is very 

high, or completion was delayed by factors largely under the control of the Authority. 

Change in Law is often treated as a Compensation Event because the Authority is a 

Government institution and law is under the control of Government. 

Information Warranties & Disclaimers 

The contract should clearly indicate which party bears the risk of accuracy for each 

category of information provided within the contract. This provides the other party 

with recourse in the event that such information is inaccurate. It also covers latent 

defects in assets put under the control of a party by the other party. A common feature 

of PPP contracts for infrastructure service provision is that Government places assets it 

owns under the control of the concessionaire. Government warrants that the assets are 

in a particular condition, and the concessionaire warrants that at the end of the contract 

it will return those assets to Government in the same condition, less normal wear and 

tear. 

Verification of the condition of such assets, along with confirmation of representations 

made by Government in the RFP, are generally included in Contractor’s due diligence. 

In practice, however, Government is legally bound to exercise reasonable care in making 

its representations and warranties regarding statements it makes in the RFP and 

contract. Despite the usual disclaimers of liability governments commonly put into 

tender and bid documents and their related contracts, there is a responsibility to exercise 

reasonable care. 

Authorities should seek to minimize the extent of any warranties it makes unless it is the 

sole source of information or such information cannot reasonably be verified by the 

private partner at reasonable cost, the Authority is confident in the accuracy of such 



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information, or if the Authority will obtain better value for money if it accepts liability 

for statements made in the tender and bid documents and their related contract. 

Service Requirements & Availability 

The focus of PPP is service delivery, so unavailability of the service should result in a 

reduction or elimination of payment by the Authority to the Contactor. The issue in PPP 

contracts is what constitutes service availability. This is a key issue because contracts for 

PPP projects usually require the Contracting Authority to pay the Contractor for service 

made available, rather than service actually used. 

For example in a water concession, in which the Contractor is to build and operate a new 

water treatment plant, the Contracting Authority (in this case a water utility) is obligated 

to pay the Contractor for the quantity of treated water made available, not the quantity of 

water actually consumed by the Authority. Another example would be a light rail 

transit system. In such a system, the Authority would be obligated to pay the Contractor 

for the availability of service, provided that the Contractor meets specified quantity 

(number of trains per route per time period) and quality standards provided in the 

contract, regardless of the actual number of passengers using the service. Another 

example would be hospital services. Generally, the Authority is obligated to pay the 

Contractor for making services available, regardless of the number of patients. 

Unfortunately, the availability (or capacity) principle of PPP contracting has the effect of 

putting most of the commercial risk onto Government. To mitigate this an international 

trend has emerged in which commercial risk is transferred to the private operator by 

giving the Contractor access to the revenues derived from the service provision. For 

water projects, the trend is to have private operators provide not only the water 

treatment facility but also the distribution network, thereby giving them access to 

consumers and the responsibility of collecting on receivables. In a light rail transit 

system, the private operator is given the right to collect tolls. In a hospital, the provider 

of the hospital and its service delivery systems is given the right to access consumers 

through the provision of health care services to patients who can afford to pay. The 

definition of unavailability is more straightforward in some sectors than in others. 

Payment for availability will vary according to the type of service made available. In the 

case of accommodation availability is normally expressed in terms of the number of 

units available, e.g. office places, student places, prisoner places. Where service is 

divided into areas, the contract must specify which areas are most important, i.e. define 

which are “core” services. In hospitals, accommodation “units” are normally divided 

into three categories: (1) emergency, operating, and intensive care facilities; (2) waiting 

areas and clinical support areas; and (3) office and education facilities. 

The conditions under which service will be deemed to have commenced must be clearly 

defined in the contract. Also, if service is made available before the required date, there 

must be a provision that specifies the reward owed to the Contractor for early delivery. 

In the same manner, conditions in which service will be deemed to not have commenced 

must be clearly defined in the contract. When “unavailability” occurs must also be very 



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clearly defined, because this is an area in which disputes can easily arise and the 

resulting financial penalties for service unavailability can create animosity between the 

parties. 

Maintenance of Assets & Service Delivery 

When the Contractor submits its financial proposal, it will include the cost of ordinary 

repairs and maintenance. The risk associated with determining what needs to be 

replaced and the cost of making such replacements is entirely upon the Contractor. This 

transfer of risk to the Operator is best achieved by expressing the service requirements 

in terms of output specifications. Bidders should be allowed to propose their own 

methods of repair and maintenance, within the parameters set by the output 

specifications. This encourages private sector innovation, a key objective of PPP 

contracting. 

The contract clauses that ensure adequate repairs and maintenance of assets should 

specify that: (1) the service is continuously available; (2) the assets are maintained in a 

manner that will enable them to reach their full working life; and (3) assets provided by 

the Authority for use by the Contractor will be returned to the Authority at the end of 

the contract period in a condition complying with the requirements of this clause. 

The contract must include provisions for the transfer of assets at the end of the contract, 

or upon early termination of service. In projects where the assets are unlikely to revert 

to the Authority on termination, and the Contractor is taking the risk of their residual 

value, it is in the best interests of the Contractor to properly maintain those assets. In 

contrast, if the assets are likely to revert to the Authority at termination, then the 

Authority will have to ensure that the price it is paying for the service includes coverage 

for maintenance. 

Performance Monitoring & Compliance 

The contract should clearly specify: (a) the level of performance required; (b) the means 

by which the Authority will measure the Contractor’s performance; and (c) 

consequences to the Contractor in event of a failure to meet the required level of 

performance. 

In setting the required level of performance, the contract should clearly specify the 

output requirements rather than specifying how the services will be delivered. The 

negotiated performance regime will become a key element of the risk transfer 

mechanism. When setting the output specifications, if a benchmark (e.g. another PPP 

service provider that is already performing satisfactorily) is available that can be used as 

a reference point in the specification of output requirements. 

The contract should also specify the mechanism for monitoring performance. It is best 

practice to disclose such monitoring mechanisms in the tender and bid documents. Such 

monitoring generally includes the collection of data by the Authority or its designee for 

performance monitoring, and the contract should indicate what kinds of data is to be 



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collected, in what manner, in what time intervals, and what the methodology will be for 

evaluation of the data that is collected. 

Contractors are responsible for the performance of their sub-contractors, so the contract 

should include provisions in which the Authority can require the Contractor to replace 

one or more of its sub-contractors. Normally, the Authority retains the right to accept or 

not accept a proposed replacement sub-contractor. 

Monitoring normally takes place at three levels: (1) systematic monitoring by Contractor 

through a quality management system that measures performance; (2) periodic review 

of the quality management system by the Authority; and (3) users reporting 

performance problems via a system that should be in place for customer satisfaction 

tracking. 

Price and Payment Mechanisms 

Price and payment mechanisms are key tools with which PPP contracts allocate risks 

and responsibilities between the parties to the contact. Price and payment is also the 

means by which performance is rewarded, with bonuses for superior performance and 

penalties for inferior performance. The principle features of a contract payment 

mechanism are: 

No payments are made until the Service is available; 

There is a single Unitary Charge for the Service, rather than separate 

independent charges relating to availability or performance; 

The single Unitary Charge should only be paid to the extent that the Service is 

available, i.e. proportionate to the number of units; and 

Deductions should reflect the severity of the failure, e.g. no service will result in 

no payment, while a minor failure will result in only a minor deduction unless 

the minor failure is repetitive in which case the deduction will increase. 

The payment mechanism will usually include provisions relating to changes in the level 

of price or tariff, e.g. indexed to inflation. Delays in adjusting the Unitary Charge for the 

price changes provided in the contract will result in financial damages to the Contractor 

and commensurate exposure on the part of the Authority to potential claims. Many 

such claims arise when tariff adjustments provided for in the contract are delayed, 

despite the good faith efforts of the Authority. Accordingly, Contracting Authorities 

must take care that they will actually be able to make tariff adjustments in a timely 

manner. This creates the need to confirm political arrangements with other government 

institutions involved in tariff regulation, e.g. municipalities, sector ministries, and sector 

regulators. 

Payment mechanisms generally fall into two categories: 

The Unitary Charge (the fee that the Authority pays the Contractor for making the 

service available) is based on the number of available units. Such units can be spaces, 



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rooms, railway cars, passenger seats, airplanes, ships docked, or any other unit that can 

be used as a component of the service provided; or 

The Unitary Charge is based on the full provision of the overall service. The payment 

mechanism starts with an assumption of full payment, and in the event of superior or 

inferior performance the payment is adjusted upward or downward through the use of 

performance points. 

The payment mechanism should not guarantee payment of the Contractor’s debt 

service. The full risk of project finance must rest on the Contractor. However, payments 

from the Authority can be earmarked to cover debt service before the remaining balance 

is made available for other uses by the Contractor. This can give some comfort to 

lenders without transferring the project financing risk to the Authority. 

The contract should provide that the Authority may deduct liquidated amounts due to it 

when making the Unitary Payments. This is called a set-off provision. Standard 

contract language for such set-offs is as follows: 

The Contractor shall not be entitled to retain or set off any amount due to the 

Authority, but the Authority may retain or set off any amount owed to it by the 

Contractor under this Contract that has fallen due and payable against any 

amount due to the Contractor under this Contract; and 

If the payment or deduction of any amount referred to in paragraph (a) above is 

disputed, then any undisputed element of that amount shall be paid and the 

disputed element shall be dealt with in accordance with the dispute resolution 

provisions of this Contract. 

Change in Service by Authority or Contractor 

Changes to the service requirements may be necessary if such changes fall outside of the 

changes anticipated at the time of contract formation. It is not unusual for advances in 

technology to motivate a Contractor to modify the technology it uses in service delivery. 

Normally, such changes are accepted by the Authority because they are improvements, 

but consultation with the Authority before making the change is a prudent requirement. 

A proposed change may involve construction or operational charges. Depending on the 

nature of the change, costs may be incurred that may not have been anticipated. 

Changes to the service requirements that involve additional capital expenditure or 

operating costs may not be easily accommodated within the contract if the additional 

costs cannot be covered by the contingency reserves put in place by the contractor. 

Because of this, the financial projections submitted by the Contractor should be checked 

by the Authority to ensure that they include contingency reserves. In particular, capital 

expenditures during construction phase should always show reserves to cover 10-15 

percent overages in construction costs and/or construction period. 

The contract should be flexible enough to enable the Authority to make minor changes 

in capital or operating costs without requiring contract amendments. In cases where it is 

the Authority that requests the change, such cases should be limited to specified types of 



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such changes in the contract. Changes that will not be allowed need to be specified also, 

such as asking the Contractor to reduce the length of a runway to an unsafe level. Care 

must be taken to not phrase service delivery requirements in a manner that could result 

in unanticipated, major increases in service delivery requirements. An example what to 

avoid would be a contract that requires the Contractor to provide all of the street 

lighting needs for a particular community. If the community experiences a growth in 

population that is far greater than expected, this service requirement would become 

unreasonable. In all PPP contracts there is a delicate balance between cost and 

flexibility. 

Authority changes during the construction period should be kept to a minimum. For 

the Contractor, the construction period represents one of the most significant areas of 

risk, so any changes of a material nature could have a profound impact on the 

profitability of the project for the Contractor. Further, the project’s financiers are not 

likely to allow the Contractor to accept any changes that would significantly increase 

finance risk and the projects financial rates of return. 

If the change by the Authority requires additional capital expenditure during 

construction phase, then generally the Authority should meet such costs by payment of 

reasonable and customary costs to the Contractor, unless the Contractor is able to fund 

the changes and amortize them over a long enough period to keep targeted financial 

returns within the boundaries that are acceptable to the project’s financiers. If such is 

the case, the Unitary Charge can be adjusted to compensate the Contractor, rather than 

having the Authority pay for the changes directly. An increase in operating costs, rather 

than capital costs, can generally be compensated by an upward adjustment in the 

Unitary Charge. 

Price Variations & Adjustments 

Every PPP contract should have a provision whereby the prices charged for the services 

will be automatically adjusted at regular intervals in accordance with a specified index. 

In the bidding documents, this index should be identified so that bidders do not submit 

proposals that use different indices, thereby compromising the comparability of the bids 

submitted. The Authority should take into account its affordability constraints when it 

selects the index to be used. It should also consider that the Contractor will charge a 

higher price if the index is not likely to provide cover for its costs. 

Price variations and adjustments that cannot be covered by indexing can be determined 

by using either benchmarking or market testing. Benchmarking involves reference to 

the prices of an existing provider of the same type of service. Market testing involves 

review of the prices charged by other providers of the same type of service. 

Sub-Contractors & Employees 

Authorities tend to view the selection and performance of Sub-Contractors as something 

it needs to control, whereas Contractors tend to view the selection and performance of 

its Sub-Contractors as an area under which it should have exclusive control. In general, 



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any attempt by an Authority to control Sub-Contractors is not advised and is in most 

cases also unnecessary. In certain limited cases, there may be overriding reasons why an 

Authority should have a degree of control over sub-contractors, for example projects in 

which there are national security or public interest concerns. 

As is the case with sub-contractors, Authorities generally should not seek control over 

the employees of the Contractor or its Sub-Contractors. Exceptions can be appropriate 

in defense projects, prison projects, school projects, and other projects in which there is 

an overriding public concern regarding what kinds of people are involved in service 

delivery. In projects requiring a security clearance for persons providing services, the 

Contractor should consider that such clearances may be outside the Authority’s control. 

Assignment & Change of Ownership 

As many PPP projects involve the construction and operation of infrastructure, contract 

periods can be very long, commonly 15-20 years and in some cases as long as 40 years. 

In view of this, some changes in ownership on the part of the Contractor are possible, 

even likely and the Authority should take care to anticipate such changes in drafting the 

wording for the contract. Similarly, over such a long period of time the business profile 

of the Contractor may change, making assignment of certain service delivery tasks to 

other entities a necessity. The contract should, therefore include provisions that will 

allow for assignment of tasks under certain specified conditions. 

Certain restrictions will be in the contract, such as the Contractor may not assign, 

novate, or transfer its rights except as provided in the lenders’ security agreement. If the 

lenders appoint a new Contractor, the rights of the original Contractor should be 

transferred. In the Contract there will also be restrictions on the Authority’s right to 

transfer its rights or obligations without the consent of the Contractor. Any attempt to 

provide restrictions on the lenders in the Contract should be met with concern. It is very 

difficult to restrict the identity of lenders or their assigns, especially when bond 

financing is involved. 

Changes of ownership can be of considerable concern to Authorities when the 

ownership profile of the Contractor is changed. Any attempt to restrict the transfer of 

ownership in the Contractor is likely to be met with considerable resistance, so the best 

an Authority can expect to achieve is a requirement to be notified of such changes. 

Treatment of Assets at End of Service Period 

There are essentially two options for treatment of assets as the end of the service period: 

The Authority takes control of the assets on expiration of the Contract. This includes 

assets for which the long-term public sector demand is clear, and for which there is no 

practical alternative use of the assets; and 

The residual value of the assets is transferred to the Contractor. These kinds of assets 

are usually generic and have alternative use outside the public sector. 



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In most PPP projects, the Authority’s long-term objectives are best served by having the 

assets transfer to the Authority at the end of the service period. This is one reason why 

so many PPP infrastructure projects are structured at Build-Operate-Transfer (BOT). 

There are many examples, such as highways. The Contractor cannot be a highways 

authority, so the highways that it builds and operates must be transferred to the 

Authority at the end of the service period. Care must be exercised, however, in the 

transfer of assets to the Authority at the end of the service period because international 

experience has shown that such transfers can bring back the same problems that existed 

when such assets were under government control and management, i.e. the 

inefficiencies that caused PPP to be developed for a solution. An example is the power 

generating facilities in the Philippines that were developed using BOT. Many of those 

facilities have reached the ends of their concession periods and have reverted to 

government ownership and operation. The same inefficiencies that existed prior to the 

PPP program are re-emerging. Governments need to view the asset transfer at the end 

of a concession contract to be an opportunity to have a new round of bidding to secure a 

new private operator rather than an opportunity for government to re-take control of 

service delivery. 

In cases where the assets are transferred to the Authority at the end of the service period, 

the contract should specify what conditions the assets must be in at the time of transfer, 

and should provide for recourse in the event that the assets are not in the condition that 

is specified in the contract. This applies to assets that will still have useful life at the time 

of transfer. For assets that will have expended their useful life by the time of transfer, it 

is not necessary to provide for compensation if they were not properly maintained. 

Most equipment will have expended its useful life by the time of transfer to the 

Authority. The Authority should focus on value for money rather than capturing 

residual asset value. 

In most cases, it is advantageous to provide an incentive to the Contractor to maintain 

the assets in good condition. Such incentive can be provided by a provision in the 

contract whereby the Contractor will be paid for the assets at time of transfer, at a price 

that is a function of the condition of the assets. Another method is to provide for an 

optional renewal of the contract if the assets are in good condition. If the assets have an 

alternative use at the end of the contract period, there are two main options for 

determining amounts payable to the Contractor at the end of the service period: (1) the 

market value of the assets; or (2) an amount bid by the Contractor when negotiating the 

original contract. 

Early Termination & Payment for Early Termination 

The Contractor should be allowed the right to terminate the contract if the Authority 

acts in a way that renders the contractual relationship untenable or completely frustrates 

the Contractor’s ability to deliver the service. In determining the compensation to be 

paid in event of default or breach by the Authority, the objective should be to ensure 

that the Contractor and the financiers are no worse off than they would have been had 

the default not occurred. The contract must provide a formula for such early 



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termination payment. Such formula can be based on either of the following three 

options: 

Compensation to reflect the base case IRR for equity and junior debt for the 

duration of the contract; 

Compensation to reflect the market value of both equity and junior debt for the 

duration of the contract; or 

Compensation to reflect the base case return for equity and junior debt for the 

remainder of the duration of the contract. 

In event of termination due to Contractor default, the contract must deal 

comprehensively with the possibility of such termination event, and must achieve a fair 

balance between the Authority’s desire to be able to terminate for inadequate service 

provision and the interests of the Contractor and financiers to restrict termination to 

only the most severe of defaults. Termination should be the Authority’s last resort. 

Generally, the Authority should have the right to terminate in the event of a consistent 

breach by the Contractor. A common definition of “persistent breach” is a breach that 

could have been rectified with reasonable efforts by the Contractor, and which has taken 

place several times over a 6 months period after the dates of the final warnings provided 

to the Contractor by the Authority. The contract should specify where the rectification 

process for such termination will involve re-tendering or not. 

Termination due to events defined as Force Majeure does not require either party to pay 

compensation or liquidated damages to the other party. 

Dispute Resolution & Authority Step-In Provisions 

A popular dispute resolution process for PPP contracting is as follows: 

The Authority and Contractor consult with each other for a fixed period of time 

in an attempt to come to a mutually satisfactory agreement; 

If consultation fails, the parties may then put their case before an expert to 

decide. The expert is appointed from a panel whose appointment is regulated by 

contract, and a separate financial expert may be appointed to handle disputes 

relating to price variations, financial returns, etc.; and 

If either party is not satisfied with the expert’s decision, it may refer the matter to 

arbitration or to the courts for a final and binding decision. The method by 

which the arbitrator will be appointed should be set out in the contract. 

In many cases, step 3 is required to be binding arbitration because both parties to the 

PPP contract agree that referring the matter to the courts will be too costly. Although 

this is a good way to avoid litigation, parties to the contract should check to see if the 

decisions reached in a binding arbitration will be honored by local courts. In many 

countries, such decisions are not really binding unless a local court ratifies them. In such 

cases, binding arbitration has little value and such cases might as well go directly to the 

courts. 



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In some circumstances, the Authority may wish to take action in order to prevent or to 

mitigate the damages that would be caused by an interruption of service during 

disputes. Such a right is normally referred to as a step-in right and it involves the 

Authority taking over all or part of the Contractor’s service delivery functions. 

Authority step-in on breach by the Contractor will generally occur through the contract 

monitoring arrangements. The Authority should continue to pay the Unitary Charge for 

service delivery that continues to be conducted by the Contractor, i.e. the areas in which 

there has been no breach of the contract. Such payments will be offset by the costs that 

the Authority incurs in providing service in areas into which it had to step in. The stepin 

provisions should not interfere with the contract’s early termination provisions. 

In the section below is the Model Concession Contract developed by the United Nations 

Committee on International Trade Law (UNCITRAL). 



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UNCITRAL Model Concession Contract 



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Annex D. 

DETAILED JOB DESCRIPTIONS 

POSITION: 


AGE: Not a consideration, other than mature, expected to 40 + 

EDUCATION: 

A degree with post graduate qualification in economics, 

accountancy, financial or business management will be 

essential. Additional qualification in technical related 

areas, would be an advantage. 

EXPERIENCE: 

Will have worked at a similar level with a management 

team, reporting to board of management with a proven 

track record of success will be essential. A high level 

professional manager with minimum 10 years work 

experience in private sector finance management will be 

desirable. Experience of working with Government 

Agencies would be an advantage. Experience of 

management of leading a team of professional staff and 

handling administrative matters including HR function 

would be an advantage. 

He/she must have a proven record in achieving results 

through people, project and financial management. 

Experience of change management process, and 

developing a new organisation accounting and working 

procedures is essential. He/she must be IT literate. 

PERSONALITY: 

CIRCUMSTANCES: 

Open, friendly, good listener, while being firm and 

assertive in approach. Must have a natural ability to meet 

and work with people. He / she should be hoverer more a 

people orientated than a technician in approach. 

Prepared to accept a fixed term contract, living in 

Lilongwe 



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Job Title: 

DIRECTOR GENERAL OF PPP UNIT 

Reports to: 

Staff Responsibility: 

Principal Secretary MoF or OPC or Chairperson PPP 

Board/ Unit 

All PPP Unit Staff 

Main Purpose of 

Position: To development of the PPP Unit by ensuring the 

organisation has sufficient resources (including budget) 

and the necessary skills to meet its objectives set out by 

legislation and as reflected in the up-dated PPP Unit 

Business Plan and Organisational Objectives. 

There are three critical and distinct areas of 

accountability within the job outline: (i) statutory 

obligations (ii) Ministerial and or Unit or Board 

requirements and (iii) staff and organisation leadership 

Criteria of Success: 

Key staff responsibilities, tasks, targets are clearly and 

formally set, accepted and resourced. Costs must be equal 

to or less than budgeted. Service and delivery quality 

levels must meet ‘stakeholder’ requirements. 

KEY TASKS: 

1. Director General of PPP Unit 

To act as a Director General of the PPP Unit, supporting its objectives and the fulfilment 

of 

statuary duties. To support the PPP Unit in the development of operational policies for 

the 

day to day working. To oversee the implementation of policy decisions and review 

progress 

against agreed time-scales. 

Criteria of Success 

The PPP Unit staff and the stakeholders are satisfied with the progress of PPP 

project implementation against agreed time-scales. 

Accountability 



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There is at least a quarterly l review of PPP project the implementation and their 

effectiveness. In addition, new and proposed PPP projects are written into an 

up dated Business Plan at least twice annually and a work programme 

published quarterly. 

2. Work Planning 

The development of up to date Work Plan with time scales for PPP deliverables within 3, 

6, 9, & 12 months for self and each Director. To develop a planning process that involves 

staff in the formulation of ideas for implementation. Facilitate and resource ad hoc 

request within the PPP Units mandate. 


The Work Plan reflects the plans of the PPP Units staffing levels and the 

stakeholders expectations. 


There are monthly PPP planning meetings scheduled and these are at least 

quarterly project and strategy reviews are undertaken with your Management 

Team (Directors). Changes are reflected in twice annual up date of the Business 

Plan. 

3. Organisation Leadership 

Provide consistent leadership and direction for the development of the PPP Unit, both 

internal and externally. Internally by setting an example and creating the clarity of PPP 

Project strategies that are understood and acted upon by all staff. Externally helping to 

gain wider understanding of the positive benefits of PPP Units role in the community 

and the development of a public awareness campaign and education programmes. 

Organisation objectives are set and applied to every day work by all. 


A flexible, loyal, expert and responsive staff with clear goals and objectives 

pursued in a co-ordinated and motivated manner. Externally there is a positive 

view of the work of the PPP Unit and the Governments economic development 

policies. 


Review quarterly results based on Units Directors contribution to these results as 

a Department/ team and on an individual basis. The PPP project plans and timetables 

are published and slippages highlighted monthly. 

4. PPP Unit Resource Management 

a) Internal Resources 

To identify and recruit and develop staff necessary to meet the PPP Units updated 

Work Plans. 



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Sufficient staffs are in place with the requisite skills. 

b) Budget Management 

To ensure a sustainable budget is set for each year that meets the PPP Units 

plans for each Department 


Costs are less than or equal to budget. 

Accountability (a) and (b) There are monthly and quarterly planning and 

budget reports that reflect the provision of adequate resources to meet the 

PPP Units needs. 

5. Transparency & Governance 

Ensure that the transparency and quality of approach follows best international 

governance practices. The integrity of the PPP Unit is beyond question, staff and 

procedures of services of the PPP procurement set down by Office of the Director Public 

Procurement (ODPP), and PPP law requirements. 


The manner PPP Unit discharges its responsibilities by providing information on 

the its governance and Procurement approach through its policies of open 

communications. 


Publish Annually Report on good governance and procurement protocols for 

each PPP project undertaken, including financial undertaking. 

6. Public Awareness & Communications 

Ensure that there is a positive public reaction from special interest groups to the process 

being adopted to support the government’s public PPP policies and programme. Ensure 

that there is a planned public information service available including full briefing of 

public representative’s etc. 


There is a positive understanding of the PPP process for the State and the benefit 

of the public. 

Reporting System 

Communicate by all types of media at all levels within the community, with a 

quarterly review of progress. 



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7. Performance, Training & Development 

A performance planning review system and competency tools are applied and set out in 

the procedures for all Directors and professional staffs. Short falls in performance are 

addressed through the appropriate development programmes. Planned and clearly 

identified training and development programmes are in place. A series of ‘in-house’ 

programmes are identified to build common competencies with core support staff. 


Performance measures are met or exceeded and deficiencies are resolved. 

All performance exceptions are being positively brought to a conclusion. 

Training and development plans are identified for all the employees of the PPP 

Unit. 


Six monthly appraisals are undertaken with all Directors. Training Plans are 

implemented to meet development needs. 

Director of PPP Projects 

AGE: 

Director 30 years plus 

EDUCATION: 

A post graduate qualification in management and or accounting and or 

engineering; additional qualification in technical related areas for utility 

position would be an advantage. He/she must have proven 

communication, report written and oral presentation skills. 

EXPERIENCE: He or she have worked at a senior level within the private sector in a related 

ndustry. Experience of a reporting to a formal management team/ board 

structure. Having lead private and public sector transaction to successful 

negotiation and conclusion would be essential perquisite for the position. 

As a Director, he/she will expected to have had a broad commercial 

management experiences with the capacity to contribute to the overall 

organisation issues, including policies, strategies and staff management 

issues; working within a Management Team and reporting formally to 

Board level. He/she must have experience of leading a high level 

professional management team, with minimum 10 years work experience 

within a related industry sector environment. 



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He/she must have a proven record in achieving results in a business 

environment to support sensitive commercial transactions. In addition 

must be capable of applying strict project ‘project management’ and or 

related IT project management support systems to the all the transactions 

allocated to him or her . 

Specialist Utility (e.g. energy, transport, communications & water) , / 

commercial expertise are essential for Directors working in utilities. 

Experience of working with or as a consultant would be an advantage. 

Understanding of Government organisations and working would be an 

advantage 

PERSONALITY: 

Must have a natural ability to meet and work with people. He / she 

should be both people orientated while having a strong technical 

understanding. Excellent report writing and communication skills will be 

essential. 


Prepared to accept a fixed term contract for the duration of the 

project or a maximum of three years duration, with the possibility 

of renewal 

Job Title: 

Reports to: 


Main Purpose of 

Position: 

Directors of PPP Projects 


Projects Transaction Managers (4) and Departmental 

Specialist Personnel, Economic Analysis, Banking and 

Investment Manager 

To support the PPP Unit policies, work programmes and 

ensure the organisation has sufficient competent personnel 

resources necessary skills to meet PPP Projects Directorates 

work plans. 

Overview of Role 



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In the job outline below recognises there are two dimensions to the Director of PPP 

Projects role. First: is the ‘external’ management of PPP transactions with line ministries; 

with the appointment of Project Transaction Managers. There is now need to place 

greater emphasis on the skills of management of Project Transaction Managers of 

supporting line ministries and working with external consultants. Secondly: there is the 

‘internal’ PPP contribution to managing the complexities of a dynamic PPP project 

management IT systems. This is to enable the accuracy of information to recoded and 

communicated to all stakeholders on the PPP project team. 

There are three central components to the Directors of PPP Projects role: 

a) Conduct and manage Feasibility Studies e.g to assess project 

potential, affordability, value for money and risk transfer 

b) Managing the ‘due diligence’ of PPP e.g. Share holdings, labour& 

employment issues; land and property ownership; legal authority to 

undertake PPP transaction; common PPP enterprise marketing 

information for PPP transactions to secure investment; due diligence at 

each stage of the PPP feasibility approvals and negotiation. 

c) PPP project management procedures and leadership e.g. 

information systems to monitor internal & external PPP project 

components. PPP Transaction project management electronic data 

storage and retrieval systems. 

KEY TASKS: 

This is a board job outline addressing seven key areas for the role of a Director of PPP 

Projects, these are: 

1. Project Feasibility Work Planning; weekly, monthly and annual with lime 

ministries and investors 

2. Project Resource Management; internal personnel, external consulting 

resources (procurement) and feasibility budgets 

3. Project Approvals; securing MoF approvals for each stage of the feasibility 

study 

4. Project ‘due diligence’ & PPP compliance Information 

5. Management Information Systems (MIS) & Communications 

We set out below the general description of these seven activities, including when you 

will be considered successful and how you will be accountable. 

1. Project Feasibility Work Planning 

The Project Feasibility Work Planning for public private partnerships (PPP) and or 

privatisations are articulated in the PPP Units annual work plans, prepared each 



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November/ December and critically reviewed quarterly. There are details for all current 

projects identifying resource requirements and timelines for the successful delivery of 

stakeholder (line ministries and potential investors) requirements, with the additional 

capacity to facilitate ad hoc requests. 

Criteria of Success: Plans are identified meeting stakeholder requirements with 

solutions put in place and articulated in the PPP Units annual work plan. 

Accountability: Monthly progress monitoring and work planning meetings 

scheduled and quarterly performance reviews are undertaken for each PPP 

project. 

2. Project Resource Management 

a) Internal Staffing Resources 

Identify the staff necessary to meet the current work plans for transactions over which 

you have 

responsibility in conjunction with the relevant Project Managers. 

Criteria of Success: That sufficient staff with the requisite skills are in place to 

complete all the PPP feasibility stages. 

b) External Resourcing 

There is careful identification of the requirement for external resources ( people and 

finance) 

to support PPP or privatisations transactions. That these resources are within the 

funding 

provisions of the PPP Unit and included in the annual work plans and within 

agreed procurement procedures. 

Criteria of Success: There is an excellent balance of utilization of internal and 

external resources to deliver on work plans for commercialisation, public private 

partnerships (PPP) and privatisations. 

c) Budget Management 

To set in conjunction with the Director of Finance and Risk Management a sustainable 

budget for each project that meets the delivery of work plans. 

Criteria of Success: Cost are less than or equal to budget. 

Accountability (a), (b) and (c). There are monthly project planning and budget 

MIS (Management Information System) reports that reflect the provision of 

adequate resources to meet the stakeholders’ needs, with monthly and quarterly 

business performance reviews. 

. 

3. Project Approvals 



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To set in place the necessary operational structures and procedures to ensure that the 

organisation meets its Ministry of Finance (MoF) approval objectives for each stage of 

the feasibility study. There are accurate and timely reports with quality standards for 

PPP transaction. There is one common standard project management system operating 

across all project portfolios under the control of each Project Transaction Manager, 

supporting IT file management, tracking and retrieval system. 

Criteria of Success: PPP Feasibility Approval quality standards are met in the 

presentation of Reports. Project Data is accurate, timely and well presented to 

enable dictions to make. That decisions are clearly communicated and accepted 

by those directly delivering on project deadlines. 

Accountability: PPP Feasibility study are conducted to a quality standard. There 

are operating manual and IT systems and procedures including cross 

organisational quality ‘files’ maintenance standards in place, with key personnel 

trained to operate the system effectively. This is supported by holding weekly 

project staff communication and problem solving meetings. Outcomes are 

reviewed at Director level at cross organisational transactions meetings at least 

quarterly. 

4. Project ‘due diligence’ 

To comply with international, legal, Government, Donor and local PPP Unit procedure 

in respect to due diligence for each PPP transaction. Maintaining of accurate records, 

providing timely information to meet fixed reporting deadlines for each transaction 

under your management. Procurement and Contract Department will set out strict 

procedures and process for PPP transaction to follow to ensure due diligence, in respect 

to the legality of the project at each stage of its MoF Approval(s) . Your full co-operation 

and responsiveness will be important to support ‘transparency and integrity’ of the 

transaction process. 


All monitoring reports are favourable on each transaction due diligence audit. 


There are monthly/ quarterly due diligence standard reports completed for all 

transactions. 

PPP Project Management Information Systems 

The Project management information systems are standardise and utilised for all 

projects across the PPP Unit providing timely and accurate information to project teams 

and stakeholders e.g. 



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Critical information is posted to the ‘intra-net’ in secure files, including 

reports made available for each project to the Director of Procurement & 

Contract Compliance 

Financial reports are submitted to the Director Finance and Risk Management 

Support Director on time to enable MIS to be published 

MoF Approvals scheduled, recorded and acted upon 

Timely reports to stakeholders & donors 


Project management information system and communication with staff and 

stakeholders are accurate and up to date. 


Project management information system and communication are reviewed 

monthly at staff and management communication meetings. 

Position: 

Finance & Risk Management Director (FRMD) 

Reports to: 



All Departmental staff 

Main Purpose of the Position: To manage all financial accounting and Init 

administration matters, by providing management 

information system (MIS) addressing PPP Project 

Risk Management and act as trustee of the Project 

Development Fund (PDF) 

Age: 

Over 30 years 

(As it unlikely that anyone younger will have the working experience required). 

Education: Must have a Master in Finance with emphasis on accounting or equivalent 

qualification. In addition it is expected that the successful candidate a professional 

accounting qualification from an international recognised body. 

Experience: Has worked as Head of Finance of a medium to large, preferentially private 

sector, organisation. Knowledge of public service and donor ( to world bank standards) 

procedures and control would be important. He/ she must have served at a senior 

management position for at least 5 years leading a dedicated financial team. He / she 

must also be computer literate, familiar with IT accounting systems, administration 

controls and security. It is expected that the successful candidate will have experience in 

developing a both financial risk management assessment and ‘management information 

systems’ (MIS) to support organisational and departmental accountability. 



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Circumstances: Must be prepared to live and work in Lilongwe, energetic, mobile and 

willing to accept fixed term contract. 

Position: 

Finance & Risk Management Director (FRMD) 

Reports to: 


Main Purpose of the Position: 


Director General of the PPP Unit 


to develop financial accounting and reporting within 

the PPP Unit including the development and 

implementation of management information system 

(MIS), risk management. 

Management accounts and the MIS are prepared on a 

monthly basis and presented to the DG and Directors 

on time and accurately. 

Accountability: 

All financial statements (monthly management and 

annual audited) and monthly MIS data are prepared 

to a standard consistent with best practice and are 

presented within the defined timescales. Donors 

receive PDF accounts monthly. 

KEY TASKS 

1. Provide Monthly MIS Statements 

Provide all departments with the critical management performance and financial 

information in a reliable and timely manner. Establish the necessary operational decision 

making structures and procedures to ensure the MIS is an effect working document and 

report mechanism. 


The Management Team and its individual members are satisfied with the 

management information and the financial information that is provided to it, 

with emphasis on PPP transactions. The Board of management or management 

team and the Director of PPP Projects Transaction and Project Transaction 

Managers are confident in the procedures and systems 




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There is a monthly and quarterly review of financial performance against control 

budget and PPP transaction business plan. The information provided is credible 

and consistent with the annual audited financial statements. 

2. Financial Statements 

Provide Monthly, Quarterly and Annual PDF financial statements for audit in a 

reliable and timely manner. 


PDF Annual financial statements are presented for audit within three months of 

the financial year end. The auditors’ report is not qualified in any way. 


All stakeholders acknowledge that all financial information that emanates from 

BPE is both timely and reliable. 

3. Risk Management Assessment Financial Statements 

Provide Risk Management Assessment Financial Statements on a Monthly, Quarterly 

and Annual for audit in a reliable and timely manner. 


Provide Risk Management Assessment statements are presented for audit within 

three months of the financial year end. The auditors’ report is not qualified in 

any way. 


The auditor’s management letter contains no indications of significant exposures 

arising from internal control weaknesses annually. 

4. Financial Standards & Controls 

Suitable procedures, controls and systems are in place to ensure that all PPP 

Transactions (historical and future) are accounted for in a manner that is 

consistent with the founding legislation, legitimate amendments thereto and best 

practice. 


PPP Unit is regarded as being a transparent organisation that deals with 

receipts, payments, assets and liabilities in a manner that is consistent 

with the best interests of the State and investors including donors 


That all internal and external audit reports and other reports that may be 

United from time to time confirm Finance & Risk Management Director 



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(FRMD) has properly accounted for all transaction receipts, assets and 

liabilities and properly procured items of cost / expenditure. 

5. Business Plans & Control Budget 

. 

To have the specific detailed operational responsibility for initiating and 

coordinating the business planning and control budget process for the PPP Unit. 

This to involve all of the departmental Directorates and to establish with them and 

their subordinates that the process as being a valid reflection and quantification of 

their own plans and of those of the PPP Unit. 


PPP Unit has a three year business plan the first year of which is to be basis of 

the control budget. The business plan and control budget are prepared from 

inputs provided by each departmental director and that those Directors to be 

committed to its achievement. 


The Management Team carry out monthly, quarterly and annual reviews of the 

actual performance of the Directorates and PPP Unit. These reviews to compare 

actual performance against that planned and where necessary corrective or 

updated action initiated and agreed, monthly and quarterly. 

6. Staffing & Resourcing 

To identify in advance the internal staff necessary to meet the PPP project plans. In 

addition, plan, 

monitor, evaluate and review all financial aspect of the PPP project activities. 


There are sufficient staff and external resources in place with the requisite skills 

whilst operating within budgets. 


There are monthly and quarterly planning and budget reports that reflect the 

provision of adequate resources to meet the Units needs. 

7. Staff Performance & Project Reviews 

There are project performance and self –assessment tools are applied to monitor, 

evaluate and progress against plans including the performance of individuals. That 

short falls in performance are addressed through the appropriate procedures on time. 

Action plans are identified from these reviews and co-ordinated. 


Performance measures are met or exceeded, deficiencies are resolved. All 

performance exceptions are being positively brought to a conclusion. 



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There are staged and planned project performance appraisals are undertaken 

with all those directly involved in the Department at least bi-annually. 

Director of Procurement & Contract Compliance 

AGE: 

Director 30 years plus 

EDUCATION: 

A qualification on Law essential and a post-graduate qualification in 

management, administration and or accounting would be an advantage. 

He/she must have proven communication, report written and oral 

presentation skills. 

EXPERIENCE: 

He or she have worked at a senior level within the public or private sector 

in a related activity. Experience of a reporting to a formal management 

team/ board structure and managing a professional team of highly 

qualified people is essential. Having lead private and public sector 

transaction to successful negotiation and conclusion would be essential 

perquisite for the position. As a Director, he/she will expected to have 

had a broad commercial management experiences with the capacity to 

contribute to the overall organisation issues, including policies, strategies 

and staff management issues with minimum 10 years work experience 

within a legal contracting work environment. 

He/she must have a proven record in achieving results in a business to 

negotiate sensitive commercial transactions. In addition must be capable 

of applying strict project ‘project management’ and or related IT project 

management support systems to the all the transactions allocated to him 

or her would be highly desirable. 

Experience of working with a large utility e.g. energy, transport, 

communications & water or commercial banking would be an added 

advantage. Experience of contracting consultant and working with 



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Donors would be an advantage. In addition; an understanding of 

Government organisations and working would be an advantage 

PERSONALITY: 

Must have a natural ability to meet and work with people. He / she 

should be both people orientated while having a strong legal and 

procurement technical understanding. Excellent report writing and 

communication skills will be essential. 


Prepared to accept a fixed term contract for the duration of the 

project or a maximum of three years duration, with the possibility 

of extension or renewal. 

Job Outline 

Position: Director of Procurement & Contract 

Compliance (DPCC) 

Reports to: 


Main Purpose of the Position: 


Accountability: 

Director General PPP Unit 


To ensure that PPP Transactions are planned and 

implemented in a manner that is consistent PPP law, 

best international practice, good governance and 

procurement protocols. 

There are no issues that cast doubts over the probity 

of a PPP Transaction, in whole or in part. 

All stakeholders including political opponents and 

the media are unable to legitimately report that 

international best procurement and contract 

compliance practices have been violated by the PPP 

Unit in any report 

KEY TASKS 

1. Procurement & Contract Compliance of PPP Transactions 

At the outset of a PPP Transaction; to understand and approve the probity issues 

contained therein. 




Final Report 

That all PPP Transactions have, at the outset, a procurement and monitoring 

and compliance plan that is approved by the Director of Procurement & 

Contract Compliance (DPCC) and the Board of Management. 


Reports from DPCC will provided to the Director General, plus all exception 

reports to the Management Board and/or internal Procurement Committee 

and the Office of the Director of Public Procurement (ODPP) monthly. Such 

reports to be confirmed by the internal and the external financial auditors at 

least annually. 

2. Procurement and Contract Compliant Procedures 

The DPCC and his/her staff will set up all procumbent procedure specifications and 

standard which meet the Malawi law, ODPP standards and international World Bank 

guidelines for all PPP Unit transactions. The reporting and highlighting of any 

deviations will be handled in open and transparent manner reporting outside of the PPP 

Unit. 


All procedure are in place and meet Malawi law, ODPP standards and 

international WB procurement guidelines for all PPP Unit transactions. 


There is continuous review of best practice and the PPP Unit it see as taking 

a pro-active role in publishing guidelines bi-annually to meet the required 

standards. 

3. Staffing & Resourcing 

To identify in advance the internal staff necessary, the external consultancy support 

required and 

set out in clear terms of reference (ToR’s) to meet the PPP project plans. In addition, 

plan, monitor, 

evaluate and review all aspect of the PPP project activities. 


There are sufficient staff and external resources in place with the requisite skills 

whilst operating within budgets. 


There are monthly and quarterly planning and budget reports that reflect the 

provision of adequate resources to meet the PPP Units needs. 

4. On going Probity Advice 



Final Report 

During the course of PPP Transactions the DPCC will be available to the PPP 

Transaction Director, transaction manager or PPP project team to provide and 

advices on issue that have arisen but were not contemplated or dealt with at the time 

of the initial PPP Transaction plan. 


That unplanned procurement and contract compliance issues to be professionally 

dealt with as and when they arise. 


Reports from DPCC provided to the Director General and the Board confirmed 

the corrective actions have been addressed monthly 

5. Procurement & Contract Compliance Sign Off 

The entire procedure and processes to be reviewed at the completion of the PPP 

Transaction and formally reported on by the DPCC. Any items of concern / 

inconsistencies with either the original plan or any interim advices to be clearly 

reported on by the DPCC . 


All involved persons will be aware of the entire probity process and the penalties 

associated with any violation. 


The Management Committee to be aware of those Transactions that are 

satisfactorily signed off and those for which special reports have been submitted 

by the ODCC monthly. For special reports are prepared for the Management 

Board or equivalent; to be fully briefed as to the violations and to be responsible 

for initiating the necessary actions as they arise. 

. 

6. Links and follow up with Internal Audit 

The DPCC establishing strong links with the work of the ‘internal Audit’ to 

ensure the his/ her actions are consistent with their practices, while seeking 

continuous improvements. 


There is a plan of action agreed between Internal Audit and the Monitoring & 

Compliance office to support each others activities and set out a programme 

for improvement within the PPP Unit . 


The Internal Audit and the Monitoring & Compliance office review each 

others activities to ensure consistency at least quarterly. 



Final Report 

7. Staff Performance, Training & Development 

Staff of the Department meet the range of competency profiles requirement in 

terms of Legal, Contract Specialist, Bid Marketing and Promotions Specialist and 

Procurement and Contract Compliance. Short falls in performance are addressed 

through the appropriate training and development programmes. Bi-annual 

appraisals are undertaken with all Departmental staff , especially during the start 

up phase of the project. Training plans are implemented to meet development 

needs. 


Performance measures are met or exceeded, deficiencies are resolved. 

All performance exceptions are being positively brought to a conclusion. 

Training and development plans are identified for all the employees of the 

Procurement & Contract Compliance Department. 


That planned and clearly identified training and development programmes are 

in place annually. A series of ‘in-house’ programmes are identified to build 

common competencies with core employees at least bi-annually.

Development of Policy, Legal, and Insitutional Framework for - ppiaf

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